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Do I understand this?

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  • Do I understand this?

    I realize that if a corporation receives property in exchange for stock, and if it assumes a debt with the property, the liability is actually considered as an asset because the interest is deductible.

    However, if the debt exceeds the total adjusted basis of the transferred property, the shareholders/taxpayers have a negative basis in the stock, which is considered as taxable gain.

    Is that right?
    "What would a reasonable person do?"

    aryels
    A.S. Paralegal
    Criminal Justice Student--B.S.

    "Give this guy 15 cents and tell him to go to hell."

  • #2
    In this case, it depends on the type of property and how it is being characterized by the corporation. Also, a shareholder should not really have any concern about the issue that you speak of unless it dilutes the value of the shares, but there are shareholder actions that can address that which have nothing to do with taxes.

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