Sarah and Emily Form Red Corporation with the Following Investments

question 68

Multiple Choice

Sarah and Emily form Red Corporation with the following investments: Sarah transfers computers worth $200,000 (basis of $80,000) , while Emily transfers real estate worth $180,000 (basis of $40,000) and services (worth $20,000) rendered in organizing the corporation. Each is issued 600 shares in Red Corporation. With respect to the transfers:

• A) Sarah has no recognized gain; Emily recognizes income/gain of $160,000.
• B) Neither Sarah nor Emily recognizes gain or income.
• C) Red Corporation has a basis of $60,000 in the real estate.
• D) Emily has a basis of $60,000 in the shares of Red Corporation.
• E) None of the above.

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