Hazel Transferred the Following Assets to Starling Corporation ? in Exchange, Hazel Received 50% of Starling Corporation's Only

question 35

Multiple Choice

Hazel transferred the following assets to Starling Corporation. $\begin{array}{lrr}&&\text { Fair Market }\\&\text { Adjusted Basis }&\text {Value }\\\text { Cash } & \$ 120,000 & \$ 120,000 \\\text { Machinery } & 48,000 & 36,000 \\\text { Land } & 108,000 & 144,000\end{array}$
? In exchange, Hazel received 50% of Starling Corporation's only class of stock outstanding. The stock has no established value. However, all parties believe that the value of the stock Hazel received is the equivalent of the value of the assets she transferred. The only other shareholder, Rick, formed Starling Corporation five years ago.

• A)Hazel has no gain or loss on the transfer.
• B)Starling Corporation has a basis of $48,000 in the machinery and $108,000 in the land.
• C)Starling Corporation has a basis of $36,000 in the machinery and $144,000 in the land.
• D)Hazel has a basis of $276,000 in the stock of Starling Corporation.
• E)None of the above.

---

Definitions:

Chlorofluorocarbon

A compound made of chlorine, fluorine, and carbon, used in refrigeration and aerosols, which contributes to ozone layer depletion.

Atmospheric Gases

Gases found in the Earth's atmosphere, including nitrogen, oxygen, carbon dioxide, and trace gases, which are essential for life and influence the planet's climate.

Nitrogen-poor Crops

Crop plants that grow in soils with low nitrogen content, often requiring additional nitrogenous fertilizers for optimum growth.

Leaching

The process by which soluble materials are washed out from soil or wastes, often leading to contamination of waterways.