Brad Forms Vott Corporation by Contributing Equipment, Which Has a Basis

question 23

Multiple Choice

Brad forms Vott Corporation by contributing equipment, which has a basis of $50,000 and an FMV of $40,000 in exchange for Vott stock. Brad also contributes $5,000 in cash. If the transaction meets the Sec. 351 control and ownership tests, what are the tax consequences to Brad?

• A)He recognizes a $5,000 loss.
• B)He recognizes a $5,000 gain and a $10,000 loss.
• C)He recognizes neither a gain nor a loss.
• D)He recognizes a $10,000 loss.

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Definitions:

Insurance

A contractual arrangement in which one party, the insurer, agrees to compensate another, the insured, for specific losses or damages in exchange for premiums.

Critical Path

The sequence of stages determining the minimum time needed to complete a project, identifying tasks that directly affect the project's duration.

Project Completion

The final phase of a project where all objectives have been achieved, and the project is closed out and handed over.

Repulsion

A force under the influence of which objects tend to move away from each other, often used in physics or to describe a strong dislike or aversion between persons.