Joe and Kay Form Gull Corporation

question 94

Multiple Choice

Joe and Kay form Gull Corporation. Joe transfers cash of $250,000 for 200 shares in Gull Corporation. Kay transfers property with a basis of $50,000 and fair market value of $240,000. She agrees to accept 200 shares in Gull Corporation for the property and for providing bookkeeping services to the corporation in its first year of operation. The value of Kay's services is $10,000. With respect to the transfer:

• A) Gull Corporation has a basis of $240,000 in the property transferred by Kay.
• B) Neither Joe nor Kay recognizes gain or income on the exchanges.
• C) Gull Corporation has a compensation deduction of $10,000.
• D) Gull capitalizes $10,000 as organizational costs.
• E) None of the above.

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Definitions:

Dementia

A group of symptoms affecting memory, thinking, and social abilities severely enough to interfere with daily functioning, often caused by diseases like Alzheimer's.

Alzheimer's Disease

A progressive neurological disorder that leads to memory loss, cognitive decline, and ultimately the inability to perform daily activities.

Distribution

The way in which something is shared out or spread across an area or among a population.

Neuritic Plaques

Accumulations of beta-amyloid protein fragments and degenerating nerve cell components, typically associated with Alzheimer's disease.