Four Shareholders Form a New Corporation in Exchange for Stock

question 21

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 Emily's basis in the stock she received?

• A)0
• B)$5,000
• C)$15,000
• D)$20,000

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Definitions:

Sensory Memories

the shortest-term element of memory, a repository for incoming sensory information from the environment that holds these stimuli for a very brief period.

Anterograde Amnesia

a condition where an individual is unable to form new memories after the occurrence of a traumatic event or the onset of the condition.

Retrograde Amnesia

A memory disorder characterized by an inability to recall events or information that were acquired before the onset of the amnesia.

Working Memory

A cognitive system responsible for temporarily holding information available for processing, important for reasoning, learning, and comprehension.