Rick Transferred the Following Assets and Liabilities to Warbler Corporation

question 62

Multiple Choice

Rick transferred the following assets and liabilities to Warbler Corporation. In return, Rick received $75,000 in cash plus 90% of Warbler Corporation's only class of stock outstanding fair market value of $225,000) .

• A)Rick has a recognized gain of $60,000.
• B)Rick has a recognized gain of $75,000.
• C)Rick's basis in the stock of Warbler Corporation is $270,000.
• D)Warbler Corporation has the same basis in the assets received as Rick does in the stock.
• E)None of the above.

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Definitions:

Foreign Company

A business entity that is based in one country but operates and has a presence in other countries outside of its home country.

Foreign Direct Investment

An investment made by a company or individual in one country in business interests in another country, in the form of establishing business operations or acquiring business assets.

Internationalization Process

The process through which a company expands its operations beyond its national borders into the international market.

Joint Venture

A business arrangement where two or more parties agree to pool their resources for the purpose of accomplishing a specific task, project, or any other business activity, sharing the risks and rewards.