Max Transfers the Following Properties to a Newly Created Corporation

question 17

Multiple Choice

Max transfers the following properties to a newly created corporation for $90,000 of stock and $10,000 cash in a transaction that qualifies under Sec.351. $$\begin{array} { | c | c | c | c | } \hline & \text { Asset One } & \text { Asset Two } & \text { Asset Three } \\\hline \text { FMV } & \$ 30,000 & \$ 45,000 & \$ 25,000 \\\text { Basis } & 35,000 & 40,000 & 20,000 \\\hline\end{array}$$ Max's recognized gain is

• A)$3,000.
• B)$5,000.
• C)$7,000.
• D)$10,000.

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Definitions:

Variable Manufacturing Overhead

Costs that vary with the level of production output but are indirect in nature, such as indirect materials and utilities.

Fixed Manufacturing Overhead

Regular, fixed costs associated with operating a manufacturing facility, including costs like rent, depreciation, and property taxes.

Machine-Hours

A measure of production activity that represents the total hours machines are operating over a given period.

Overapplied

A scenario in which the overhead attributed to products or services surpasses the real overhead expenses.