Michael and Freddy Form Willow Corporation

question 2

Multiple Choice

Michael and Freddy form Willow Corporation.Michael transfers property (basis of $175,000 and fair market value of $100,000) while Freddy transfers land (basis of $50,000 and fair market value of $90,000) and $10,000 in cash.Each receives 50% of Willow Corporation's stock, which is worth a total of $200,000.As a result of these transfers:

• A)Michael has a recognized loss of $75,000, and Freddy has a recognized gain of $40,000.
• B)Neither Michael nor Freddy has any recognized gain or loss.
• C)Michael has no recognized loss, but Freddy has a recognized gain of $40,000.
• D)Willow Corporation will have a basis in the land of $90,000.
• E)None of the above.

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Definitions:

Karl Marx

Karl Marx was a 19th-century philosopher, economist, and political theorist known for his critical analysis of capitalism and his influence on the development of communist theory.

Manifest Function

An intended and recognized outcome or effect of a social structure or institution.

Intended Function

The purposeful and expected outcome or role that an object, system, or policy is designed to fulfill.

Racial Equality

The state or condition in which individuals are treated equally regardless of their race, ensuring equal opportunities and protections under the law.