This Year P and Q Formed ABC Corporation

question 30

Multiple Choice

This year P and Q formed ABC Corporation.P transferred a building worth $90,000 (basis $25,000) to the corporation in an exchange generally qualifying under § 351.The building was subject to a mortgage of $10,000, and P received stock worth $80,000 on the exchange.P will recognize

• A)No gain or loss and have a basis in his stock of $25,000
• B)No gain or loss and have a basis in his stock of $15,000
• C)A gain of $10,000 and have a basis in his stock of $25,000
• D)A gain of $15,000
• E)A gain of $65,000

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Definitions:

Illegal Acts

Actions that are forbidden by law and subject to official punishment.

Physiological Need

A basic bodily requirement.

Basic Requirement

Fundamental needs or conditions that must be met to achieve a goal or maintain a standard.

Drive-Reduction Theory

the idea that a physiological need creates an aroused state (a drive) that motivates an organismto satisfy the need