Jerry Transfers Two Assets to a Corporation as Part of a Sec

question 93

Multiple Choice

Jerry transfers two assets to a corporation as part of a Sec. 351 exchange. The first asset has an adjusted basis of $70,000 and an FMV of $50,000. The second asset has an adjusted basis of $70,000 and an FMV of $150,000. The FMV of the stock received is $180,000, and he also receives $20,000 cash. The realized and recognized gain on the second asset is

• A)$80,000 realized; $20,000 recognized.
• B)$80,000 realized; $15,000 recognized.
• C)$20,000 realized; $10,000 recognized.
• D)$10,000 realized; $10,000 recognized.

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Definitions:

Retained Earnings

The segment of net profit held back by the business rather than being shared with its proprietors in the form of dividends.

Deferred Revenue

Income that has been received by a company for goods or services not yet delivered or performed, recognized as a liability on the balance sheet.

Common Stock

Represents ownership in a corporation, granting holders voting rights and a share in the company's profits through dividends.

Authorized

Officially given permission or power to do something, often used in legal and corporate contexts.