Gabriella and Juanita Form Luster Corporation

question 73

Multiple Choice

Gabriella and Juanita form Luster Corporation. Gabriella transfers cash of $50,000 for 50 shares of stock, while Juanita transfers information concerning a proprietary process (basis of zero and fair market value of $50,000) for 50 shares of stock.

• A) The transfers to Luster are fully taxable to both Gabriella and Juanita.
• B) Juanita must recognize gain of $50,000.
• C) Because Juanita is required to recognize gain on the transfer, Gabriella also must recognize gain.
• D) Neither Gabriella nor Juanita will recognize gain on the transfer.
• E) None of the above.

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Definitions:

Intentional Confinement

The deliberate act of restricting a person’s movements or freedom without lawful authority.

Conditional Privilege

A legal exemption that allows an individual to make statements that might otherwise be considered defamatory if made in certain conditions or with specific motives aimed at serving the public interest.

Detained

Held or kept in custody, often by authorities for legal or security reasons.

Intentional Tort

A wrongful act, done with the intent to cause harm to another, that results in injury or damage.