Sami Transferred Property with a Fair Market Value of $600

question 40

Multiple Choice

Sami transferred property with a fair market value of $600 and a tax basis of $300 to a corporation in exchange for stock with a fair market value of $600. In addition, Sami received stock with a fair market value of $50 in exchange for services she provided to the corporation in the incorporation process. Which of the following statements best describes the tax result to Sami because of the exchanges?

• A)Sami will recognize $50 of compensation income, but she can count the shares of stock she receives in exchange for services in determining if the control test is met under §351.
• B)Sami will recognize $50 of compensation income, but she cannot count the shares of stock she receives in exchange for services in determining if the control test is met under §351.
• C)Sami will not recognize $50 of compensation income, but she can count the shares of stock she receives in exchange for services in determining if the control test is met under §351.
• D)Sami will not recognize $50 of compensation income, and she cannot count the shares of stock she receives in exchange for services in determining if the control test is met under §351.

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Definitions:

Inherited Characteristics

Traits or features passed on from one generation to the next through genes, including physical appearance, health conditions, and behavioral tendencies.

Biosphere

The global sum of all ecosystems, including all life forms and their relationships, from the deepest oceans to the atmosphere.

Asexual Reproduction

Reproductive process that does not involve the fusion of gametes and results in offspring genetically identical to the parent.

Acellular Levels

Refers to biological organization levels that do not involve cells, such as molecules and atoms in the biological context.