Jeremy Operates a Business as a Sole Proprietorship

question 108

Multiple Choice

Jeremy operates a business as a sole proprietorship. The proprietorship uses the cash method of accounting. He decides to incorporate and transfers the assets and liabilities of the sole proprietorship to the newly formed corporation in exchange for its stock. The assets, which include $10,000 of accounts receivable with a zero basis, have a basis of $20,000 and an FMV of $40,000. The liabilities include accounts payable of $12,000, which will be deductible when paid, and a note payable on medical equipment of $7,000. Jeremy's basis for his stock is

• A)$40,000.
• B)$20,000.
• C)$13,000.
• D)$8,000.

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Definitions:

Physical Confrontations

Direct and aggressive encounters between individuals or groups, often involving physical force.

Excessive Stress

A harmful level of stress that can lead to physical, mental, and emotional health issues.

Tax System

The legal framework that outlines how taxes are collected, managed, and spent by the government.

Revenue

The overall revenue produced by a corporation through its primary business of selling goods or services.