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:

Capacity

The maximum amount of work or production an organization is capable of completing in a specified period.

Net Present Value

A financial metric that calculates the value of a series of cash flows by discounting them to present value using a specific rate, often used in capital budgeting.

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds.