Hazel Transferred the Following Assets to Starling Corporation

question 16

Multiple Choice

Hazel transferred the following assets to Starling Corporation. Adjusted Basis Fair Market Value Cash $120,000 $120,000 Machinery 48,000 36,000 Land 108,000 144,000 ​ In exchange,Hazel received 50% of Starling Corporation's only class of stock outstanding.The stock has no established value.However,all parties believe that the value of the stock Hazel received is the equivalent of the value of the assets she transferred.The only other shareholder,Rick,formed Starling Corporation five years ago.

• A)Hazel has no gain or loss on the transfer.
• B)Starling Corporation has a basis of $48,000 in the machinery and $108,000 in the land.
• C)Starling Corporation has a basis of $36,000 in the machinery and $144,000 in the land.
• D)Hazel has a basis of $276,000 in the stock of Starling Corporation.
• E)None of the above.

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Definitions:

Interest Rate Swap

A financial derivative contract in which two parties exchange interest rate cash flows, typically one fixed rate and one variable rate.

Fixed Rate

A fixed rate is an interest rate on a liability, such as a loan or mortgage, that remains the same for the entire term of the loan or a set period of time, providing payment stability.

Variable Rate

An interest rate that can change over time, often based on an underlying benchmark interest rate or index that reflects the cost of borrowing in the credit markets.

Forward Contract

An agreement that isn't standardized between two parties to purchase or sell an asset at a future date determined today at a price agreed upon today.