Maddie and Roxie each own 50% stock in POX, an S corporation. Maddie will assume Roxie’s responsibilities while Roxie takes an extended leave in exchange for 35% of Roxie’s stock ownership, valued at $55,000. Maddie’s services are valued at $40,000. What is the treatment and recognized gain for Maddie on the transfer?

Treatment

Recognized Gain

Treatment Section 351 transfer

Recognized Gain $0

Treatment Gain recognized

Recognized Gain $15,000

Treatment Gross income

Recognized Gain $55,000

Treatment Boot received

Recognized Gain $40,000