Four Shareholders Form a New Corporation in Exchange for Stock

question 11

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.How much income or gain does Jackson recognize?

• A)$0
• B)$5,000
• C)$10,000
• D)$15,000

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Definitions:

Team Success

Refers to the achievement of goals and objectives by a group of individuals working together effectively and efficiently.

Individual Success

Achieving personal goals or objectives set by oneself, often measured by personal satisfaction or attainment of desired outcomes.

Teamwork Effect

The enhanced results or outcomes that emerge when individuals work collaboratively and effectively as a team, leveraging diverse skills and perspectives.

Familiarity

Familiarity refers to the level of knowledge or recognition an individual has about something through repeated exposure or experience.