Rick Transferred the Following Assets and Liabilities to Warbler Corporation

question 65

Multiple Choice

Rick transferred the following assets and liabilities to Warbler Corporation. $\begin{array}{lrr} &&\text { Fair Market }\\&\text { Adjusted Basis }&\text { Value }\\\text { Building } & \$ 210,000 & \$ 225,000 \\\text { Equipment } & 45,000 & 75,000 \\\text { Trucks } & 15,000 & 30,000 \\\text { Mortgage (held for four years) on building } & 30,000 & 30,000\end{array}$ ? 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:

Vastus Lateralis

A muscle located on the side of the thigh, part of the quadriceps group, important for leg extension.

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Young children from birth to 1 year of age.

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Prone Position

Lying flat with the front or face downwards, often used in medical settings for specific treatments or examinations.