Kirby and Helen Form Red Corporation

question 7

Multiple Choice

Kirby and Helen form Red Corporation. Kirby transfers property, basis of $20,000 and value of $300,000, for 100 shares in Red Corporation. Helen transfers property, basis of $40,000 and value of $280,000, and provides legal services in organizing the corporation. The value of her services is $20,000. In return Helen receives 100 shares in Red Corporation. With respect to the transfers:

• A) Kirby will recognize gain.
• B) Helen will not recognize any gain or income.
• C) Red Corporation will have a basis of $280,000 in the property it acquired from Helen.
• D) Red will have a business deduction of $20,000.
• E) None of the above.

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Definitions:

Chess Team

A group of individuals who compete together in chess tournaments, often representing a school, club, or country.

Diving Team

A group of divers, often affiliated with sports or professional activities, who train together and may perform synchronized diving routines or underwater tasks.

Collective Identification

The process through which individuals perceive themselves as belonging to a group, aligning with its values and goals.

Mutual Trust

A foundational element in relationships within organizations, signifying the confidence parties have in each other's integrity, character, and abilities.