Individuals Bert and Tariq Form Shark Corporation

question 98

Multiple Choice

Individuals Bert and Tariq form Shark Corporation.Bert transfers equipment with a $290,000 adjusted basis and a $335,000 FMV for 50% of the stock worth $310,000 and a note of Shark Corporation valued at $25,000.Tariq transfers cash of $335,000 in exchange for 50% of the stock of Shark Corporation worth $310,000 and a $25,000 note.Bert's recognized gain is

• A)$0.
• B)$20,000.
• C)$25,000.
• D)$45,000.

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Definitions:

Contractual Agreement

A legally binding agreement between two or more parties, typically outlining the terms and conditions of a business transaction or relationship.

Equity Method

An accounting technique used to record investments in which the investor has significant influence over the investee, recognizing the proportionate share of the investee's net income or loss.

Variable Interest Enterprise

An entity in which an investor holds a controlling interest that is not based on a majority of voting rights.

Consolidated Financial Statements

Financial statements that combine the financial information of a parent company with its subsidiaries into one comprehensive document.