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.

---

Definitions:

Race Riot

A violent conflict initiated based on racial tensions, often involving confrontations between members of different ethnic or racial groups.

Act Consequentialists

A branch of consequentialism focusing on the consequences of individual actions rather than general rules.

Moral Rules

Fundamental principles that govern behavior, considered right and essential by a culture or society, often reflecting shared values, ethics, and expectations for personal conduct.

Rule Consequentialism

An ethical theory that posits the morality of an action depends on the consequences of the rules that would be established by following or endorsing that action.