Donghai Transferred the Following Assets to Starling Corporation In Exchange, Donghai Received 50% of Starling Corporation's Only Class

question 41

Multiple Choice

Donghai transferred the following assets to Starling Corporation. $\begin{array}{lll}&&\text { Fair Market }\\& \text { Adjusted Basis } & \text { Value }\\\text { Cash } & \$ 120,000 & \$ 120,000 \\\text { Machinery } & 48,000 & 36,000 \\\text { Land } & 108,000 & 144,000\end{array}$ In exchange, Donghai received 50% of Starling Corporation's only class of stock outstanding. The stock has no established value. However, all parties believe that the value of the stock Donghai received is the equivalent of the value of the assets she transferred. The only other shareholder, Rick, formed Starling Corporation five years ago.

• A) Donghai has no gain or loss on the transfer.
• B) Starling Corporation has a basis of $48,000 in the machinery and $108,000 in the land.
• C) Starling Corporation has a basis of $36,000 in the machinery and $144,000 in the land.
• D) Donghai has a basis of $276,000 in the stock of Starling Corporation.
• E) None of these.

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Definitions:

Poverty Line

is a threshold set by a government or organization, below which individuals or families are considered to live in poverty, based on income.

Poverty Rate

A measure of the proportion of a population living below the poverty line, indicating the extent of economic hardship.

Working Poor

Individuals who have employment but whose income levels fall below a poverty line, typically due to low-paying jobs.

Minimum Wage

The lowest legal hourly pay for workers, set by government legislation.