Brad Forms Vott Corporation by Contributing Equipment, Which Has a Basis

question 23

Multiple Choice

Brad forms Vott Corporation by contributing equipment, which has a basis of $50,000 and an FMV of $40,000 in exchange for Vott stock. Brad also contributes $5,000 in cash. If the transaction meets the Sec. 351 control and ownership tests, what are the tax consequences to Brad?

• A)He recognizes a $5,000 loss.
• B)He recognizes a $5,000 gain and a $10,000 loss.
• C)He recognizes neither a gain nor a loss.
• D)He recognizes a $10,000 loss.

---

Definitions:

Temporary Basis

A condition or situation that is not permanent and is expected to change or end after a certain period.

Regular Workforce

Describes the employees who work under standard employment contracts with predictable hours and benefits, as opposed to temporary or freelance workers.

Compressed Workweek

An employment schedule that allows a full week's work to be completed in fewer days than the traditional five-day workweek.

Full-Time Job

Describes employment where an individual works a standard number of hours set by their employer, usually around 35 to 40 hours per week.