Kirby and Helen Form Red Corporation

question 7

Multiple Choice

Kirby and Helen form Red Corporation. Kirby transfers property, basis of $20,000 and value of $300,000, for 100 shares in Red Corporation. Helen transfers property, basis of $40,000 and value of $280,000, and provides legal services in organizing the corporation. The value of her services is $20,000. In return Helen receives 100 shares in Red Corporation. With respect to the transfers:

• A) Kirby will recognize gain.
• B) Helen will not recognize any gain or income.
• C) Red Corporation will have a basis of $280,000 in the property it acquired from Helen.
• D) Red will have a business deduction of $20,000.
• E) None of the above.

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Definitions:

Nasogastric Tube

A flexible tube that is inserted through the nose and extends to the stomach for feeding or removing stomach contents.

Swallows

The act of causing or allowing something (typically food or liquid) to pass from the mouth down through the esophagus to the stomach.

Head Flexed

A position where the head is tilted or bent forward.

Fecal Impaction

A serious condition where hard, dry masses of stool become stuck in the colon or rectum, leading to symptoms like severe constipation and abdominal pain.