Mitchell and Lane Form Green Corporation

question 85

Multiple Choice

Mitchell and Lane form Green Corporation. Mitchell transfers property (basis of $105,000 and fair market value of $90,000) while Lane transfers land (basis of $8,000 and fair market value of $75,000) and $15,000 of cash. Each receives 50% of Green Corporation's stock (total value of $180,000) . As a result of these transfers:

• A)Mitchell has a recognized loss of $15,000, and Lane has a recognized gain of $67,000.
• B)Neither Mitchell nor Lane has any recognized gain or loss.
• C)Mitchell has no recognized loss, but Lane has a recognized gain of $15,000.
• D)Green Corporation will have a basis in the land of $23,000.
• E)None of the above.

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Definitions:

John Partner's, Capital

Represents the account on a balance sheet indicating the value of an owner's (John Partner, in this case) interest in the business.

Cash

A form of currency that includes coins and currency notes, used as a medium of exchange.

Accounts Payable

A liability on a company's balance sheet representing the amounts due to suppliers by the business.

Cash

Money in the form of coins or notes that is readily available for transactions.