Kirby and Helen Form Red Corporation

question 10

Multiple Choice

Kirby and Helen form Red Corporation. Kirby transfers property, basis of $20,000 and value of $300,000, for 100 shares in Red Corporation. Helen transfers property, basis of $40,000 and value of $280,000, and provides legal services in organizing the corporation. The value of her services is $20,000. In return Helen receives 100 shares in Red Corporation. Regarding these transfers:

• A) Kirby will recognize gain.
• B) Helen will not recognize any gain or income.
• C) Red Corporation will have a basis of $280,000 in the property it acquired from Helen.
• D) Red will have a business deduction of $20,000.
• E) None of these.

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Definitions:

Decision-making Process

The steps involved in choosing among alternatives to reach a conclusion or resolve an issue.

International Business

Commercial transactions that occur across national borders, including trade, investments, and partnerships.

Bilateral Trade Agreements

Trade agreements between two countries that aim to reduce tariffs and quotas to encourage trade and economic cooperation.

International Law

The body of law that governs the conduct of nations and international organizations and their relations with one another and with natural and juridical persons.