Rose and Wayne Form a New Corporation

question 54

Multiple Choice

Rose and Wayne form a new corporation. Rose contributes cash for 85% of the stock and Wayne contributes services for 15% of the stock. The tax effect is

• A)Rose and Wayne must recognize their realized gains, if any.
• B)Wayne must report the FMV of the stock received as capital gain.
• C)Rose and Wayne are not required to recognize their realized gains.
• D)Wayne must report the FMV of the stock received as ordinary income.

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Definitions:

Level of Significance

A threshold of probability set before testing hypotheses, below which the null hypothesis is rejected.

Treatments

Specific conditions applied to the participants or subjects in an experimental study.

Total

The sum of all values in a set of numbers.

Null Hypothesis

The default hypothesis that there is no significant difference or effect, serving as a starting point for statistical hypothesis testing.