Rita Forms Finch Corporation by Transferring Land (Basis of $125,000;

question 18

Essay

Rita forms Finch Corporation by transferring land (basis of $125,000; fair market value of $750,000) which is subject to a mortgage of $375,000. Two weeks prior to incorporating Finch, Rita borrows $125,000 for personal purposes
and gives the lender a second mortgage on the land. Finch Corporation issues stock worth $250,000 to Rita and assumes the two mortgages on the land. What are the tax consequences to Rita and to Finch Corporation?

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Definitions:

Soviet Control

The political, military, and economic domination by the Soviet Union over various countries, particularly in Eastern Europe, during the Cold War.

Suez Crisis

The Suez Crisis was a diplomatic and military confrontation in late 1956 involving Egypt, Israel, France, and the United Kingdom, centered around the control of the Suez Canal, a key waterway for international trade.

Arab World

A region in North Africa and the Middle East, encompassing 22 countries where Arabic is a dominant language.

Anti-American Prejudice

A bias or dislike against the United States, its policies, or its people.