Carol decides to transfer her rental apartment building to a wholly owned corporation to insulate herself from tenant liabilities.The apartment building is valued at $1,250,000 and has a basis of $1,350,000 due to $400,000 of recent improvements made to the building.The new corporation also assumes the $200,000 remaining on Carol’s mortgage on the building.

a. What is the value of the stock Carol receives from the corporation?

b. What is Carol’s realized and recognized gain or loss on the transfer?

c. What are Carol’s basis in her stock and the corporation’s basis in the building?

Explain your answer.

AppendixLO1