Kirby and Helen Form Red Corporation

question 7

Multiple Choice

Kirby and Helen form Red Corporation. Kirby transfers property, basis of $20,000 and value of $300,000, for 100 shares in Red Corporation. Helen transfers property, basis of $40,000 and value of $280,000, and provides legal services in organizing the corporation. The value of her services is $20,000. In return Helen receives 100 shares in Red Corporation. With respect to the transfers:

• A) Kirby will recognize gain.
• B) Helen will not recognize any gain or income.
• C) Red Corporation will have a basis of $280,000 in the property it acquired from Helen.
• D) Red will have a business deduction of $20,000.
• E) None of the above.

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Definitions:

Cumulative Effects

The overall impact of multiple factors or actions, considered collectively rather than individually.

Inoculate

To introduce a microorganism or vaccine into an organism to stimulate immunity against a specific disease or to impart a specific quality.

Intense Changes

Significant and often drastic alterations in a situation, organization, or environment that require rapid adaptation or response.

Exploitation

Exploitation involves taking unfair advantage of individuals or resources usually for personal gain or benefits, often violating principles of equality and justice.