Mel, Fred, and Mary Form Canary Corporation

question 181

Multiple Choice

Mel, Fred, and Mary form Canary Corporation. Mel and Fred each contribute cash of $250,000, while Mary contributes land (basis of $100,000; fair market value of $300,000) . Each transferor receives one-third of Canary's shares, and Mary also receives $50,000 in cash. Which, if any, of the following choices is a correct result of the incorporation?

• A)Canary Corporation's basis in the land is $100,000.
• B)Canary's basis in the land is $150,000.
• C)Canary's basis in the land is $300,000.
• D)Mary's basis in the Canary stock is $450,000.
• E)None of the above.

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Definitions:

Personal Reward

A benefit or positive outcome that an individual receives or perceives to receive after performing a particular action.

Social Exchange Theory

A theoretical framework suggesting that social behavior is the result of an exchange process aiming to maximize benefits and minimize costs in relationships.

Altruism

The selfless concern for the well-being of others, often leading to acts of kindness without expectation of reward.

Companionate Love

A type of love marked by profound attachment, companionship, and emotional closeness, commonly observed in enduring relationships.