Four Shareholders Form a New Corporation in Exchange for Stock

question 61

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 Jackson's basis in the stock he received?

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

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Definitions:

Renal Capsule

The renal capsule is a tough fibrous layer surrounding the kidney and providing it with protection against trauma and infection.

Renal Calyx

A structure in the kidney that funnels urine from the collecting ducts into the renal pelvis and ureter.

Renal Column

Cortical tissue located between the pyramids in the kidney, part of the kidney's supportive and structural system.

Renal Pyramid

Cone-shaped structures located in the kidneys, consisting of tubules that transport urine from the cortical, outer part of the kidney to the calyces and renal pelvis.