Four Shareholders Form a New Corporation in Exchange for Stock

question 95

Multiple Choice

Four shareholders form a new corporation in exchange for stock with a fair market value of $1,000 per share. Benjamin transfers investment land (current fair market value of $35,000) that he purchased 10 year ago for $15,000. In exchange, Benjamin receives 30 shares of stock and $5,000 cash. Andrew transfers a machine with a basis of $45,000 and a fair market value of $35,000. Andrew receives 30 shares of stock and $5,000 cash. Emily transfers a rental office building (current fair market value of $45,000) that she purchased 20 years ago for $60,000. Its current basis is $15,000 after recognition of $45,000 in depreciation expense. The corporation assumes the $20,000 balance on the original mortgage and Emily receives 25 shares of stock from the corporation in the exchange. Jackson provided the legal services to organize the corporation (value $5,000) and contributes $10,000 in cash in exchange for 15 shares of stock. What is the corporation's basis for the land it received from Benjamin?

• A) $5,000
• B) $10,000
• C) $15,000
• D) $20,000

---

Definitions:

Attempted Census

An effort to enumerate all individuals in a population, which may not achieve complete coverage due to various challenges.

Professor's Evaluation

A review or assessment of a professor's teaching performance, usually conducted by students or academic peers.

University

An educational and research entity that grants academic titles in several fields of study.

Voluntary Response Sampling

A sampling method where participants decide for themselves whether to be included in the study, often leading to bias.