Jeremy Operates a Business as a Sole Proprietorship

question 100

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

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Definitions:

Capitalization

Capitalization refers to the usage of uppercase letters at the beginning of sentences or proper nouns to denote importance or specific identities.

Room

An area or space within a building enclosed by walls, floor, and ceiling, used for a variety of purposes.

Punctuation

The marks used in writing that separate sentences and their elements to clarify meaning.

Grandmothers

The mothers of one's parents, often playing a significant role in family structure and the upbringing of grandchildren.