Sami Transferred Property with a Fair Market Value of $600

question 94

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 section 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 section 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 section 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 section 351.

---

Definitions:

Related

A term indicating that two or more variables have some form of association or connection with each other.

Dependent

Referring to a variable in experimental and statistical settings that is expected to change in response to manipulations of another variable.

Continuous

A type of data that can take on any value within a given range and can thus represent subtler variances accurately.

Independent Means

Statistical tests that compare the means of two groups that are not connected or related.