Lucas Transfers Investment Land to a Corporation as Part of a Section

question 27

Multiple Choice

Lucas transfers investment land to a corporation as part of a Section 351 transaction.The land has a fair market value of $75,000, an adjusted basis of $30,000, and is encumbered by a mortgage (from its original purchase five years ago by Lucas) of $40,000 that the corporation assumes.In exchange for the land, the corporation issues stock to Lucas worth $35,000.How much gain does Lucas recognize, what is Lucas's stock basis, and what is the basis of the land to the corporation, respectively?

• A)$0 gain; $30,000 stock basis; $30,000 land basis
• B)$10,000 gain; $0 stock basis; $40,000 land basis
• C)$10,000 gain; $10,000 stock basis; $30,000 land basis
• D)$0 gain; $0 stock basis; $30,000 land basis

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Definitions:

Quantity Demanded

The complete volume of a good or service that individuals intend to acquire at a predetermined price within a set period.

Shortage

A situation in which the demand for a good or service exceeds its supply in a market.

Surplus

An excess of income or assets over expenditure or liabilities in a given period, indicating financial health.

Price Ceiling

A government-imposed limit on how high a price can be charged for a product or service, typically used to control costs for essential items like food and rent.