Rick Transferred the Following Assets and Liabilities to Warbler Corporation

question 20

Multiple Choice

Rick transferred the following assets and liabilities to Warbler Corporation. In return, Rick received $75,000 in cash plus 90% of Warbler Corporation's only class of stock outstanding (fair market value of $225,000) .

• A)Rick has a recognized gain of $60,000.
• B)Rick has a recognized gain of $75,000.
• C)Rick's basis in the stock of Warbler Corporation is $270,000.
• D)Warbler Corporation has the same basis in the assets received as Rick does in the stock.
• E)None of the above.

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Definitions:

Health Insurance

An insurance policy designed to cover the cost of medical and surgical procedures for the person insured.

Restitution

Compensatory measures taken to restore a party harmed by a breach of contract or wrong to their original position before the violation occurred.

Disaffirmance

The legal right of a party, usually a minor, to renounce or void a contract, thereby releasing them from any obligations.

Consideration

Consideration in a legal context refers to something of value that is exchanged between parties as part of a contract, necessary for the contract to be legally binding.