Rose and Wayne Form a New Corporation

question 54

Multiple Choice

Rose and Wayne form a new corporation. Rose contributes cash for 85% of the stock and Wayne contributes services for 15% of the stock. The tax effect is

• A)Rose and Wayne must recognize their realized gains, if any.
• B)Wayne must report the FMV of the stock received as capital gain.
• C)Rose and Wayne are not required to recognize their realized gains.
• D)Wayne must report the FMV of the stock received as ordinary income.

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Definitions:

Speech

The expression of thoughts and feelings by articulated sounds or words, a primary means of human communication.

Perception

The process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment.

Garden Path Sentences

Sentences that begin in such a way that a reader's most likely interpretation will be incorrect and will need to be revised upon reaching the end of the sentence.

Psycholinguists

Scientists who study the psychological and neurobiological factors that enable humans to acquire, use, comprehend and produce language.