Four Shareholders Form a New Corporation in Exchange for Stock

question 18

Multiple Choice

Four shareholders form a new corporation in exchange for stock with a fair market value of $1,000 per share.Benjamin transfers investment land (current fair market value of $35,000) that he purchased 10 year ago for $15,000.In exchange, Benjamin receives 30 shares of stock and $5,000 cash.Andrew transfers a machine with a basis of $45,000 and a fair market value of $35,000.Andrew receives 30 shares of stock and $5,000 cash.Emily transfers a rental office building (current fair market value of $45,000) that she purchased 20 years ago for $60,000.Its current basis is $15,000 after recognition of $45,000 in depreciation expense.The corporation assumes the $20,000 balance on the original mortgage and Emily receives 25 shares of stock from the corporation in the exchange.Jackson provided the legal services to organize the corporation (value $5,000) and contributes $10,000 in cash in exchange for 15 shares of stock.What is the corporation's basis for the building it received from Emily?

• A)$10,000
• B)$15,000
• C)$20,000
• D)$35,000

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Definitions:

Complex Communication

The exchange of information or messages that involves multiple channels, nuanced understanding, or sophisticated encoding and decoding processes.

Virtual Teams

Groups of people who work together from different geographical locations, connected by technologies such as video conferencing and collaborative software.

Time Orientations

The way in which individuals or cultures perceive, value, and utilize time, often influencing behavior and decision-making.

Time-Related Language

The use of language and terms that reflect, describe, or relate to time, including past, present, and future tenses.