Jeremy Operates a Business as a Sole Proprietorship

question 108

Multiple Choice

Jeremy operates a business as a sole proprietorship. The proprietorship uses the cash method of accounting. He decides to incorporate and transfers the assets and liabilities of the sole proprietorship to the newly formed corporation in exchange for its stock. The assets, which include $10,000 of accounts receivable with a zero basis, have a basis of $20,000 and an FMV of $40,000. The liabilities include accounts payable of $12,000, which will be deductible when paid, and a note payable on medical equipment of $7,000. Jeremy's basis for his stock is

• A)$40,000.
• B)$20,000.
• C)$13,000.
• D)$8,000.

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Definitions:

Nurturance

The act of caring for and encouraging the growth or development of someone or something.

Nuclear Family

A basic social unit consisting of parents and their children, considered as a group, whether dwelling together or not.

Culturally Accepted

Practices, behaviors, or norms that are widely recognized and endorsed within a particular society or community.

Stereotypical Gender Traits

Oversimplified and widely held beliefs about the characteristics, attributes, and behaviors expected of males and females, based on societal norms.