In Mary's building transfer to White Corporation, what is Mary's recognized gain?

To determine Mary's recognized gain in her transfer of the building to White Corporation, we need to look at the scenario involving the provisions of Internal Revenue Code Section 351, which addresses transfers to controlled corporations. Under this section, if a transferor (in this case, Mary) transfers property to a corporation in exchange for stock and immediately after the exchange controls the corporation, typically there is no recognized gain or loss on the transaction. This means the transferor defers any gain for tax purposes.

In this situation, if the transfer did not qualify under Section 351 (for example, if Mary did not maintain control after the transfer or if boot was involved), then there may be a recognized gain. The gain recognized would be the amount realized from the transfer minus the adjusted basis of the property transferred.

If we consider the answer indicating Mary has a recognized gain of $5,000, this suggests that either some cash or other property (often referred to as "boot") was received in addition to stock. If her basis in the building was higher than the amount realized from the transfer, she would only recognize gain to the extent of this boot received, if any. This indicates a partial recognition depending on the assets exchanged aside from stock.

In such transactions