Joe and Kay Form Gull Corporation

question 94

Multiple Choice

Joe and Kay form Gull Corporation. Joe transfers cash of $250,000 for 200 shares in Gull Corporation. Kay transfers property with a basis of $50,000 and fair market value of $240,000. She agrees to accept 200 shares in Gull Corporation for the property and for providing bookkeeping services to the corporation in its first year of operation. The value of Kay's services is $10,000. With respect to the transfer:

• A) Gull Corporation has a basis of $240,000 in the property transferred by Kay.
• B) Neither Joe nor Kay recognizes gain or income on the exchanges.
• C) Gull Corporation has a compensation deduction of $10,000.
• D) Gull capitalizes $10,000 as organizational costs.
• E) None of the above.

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Definitions:

Sign Test

A non-parametric test used to determine if there is a statistically significant difference between paired or matched samples by examining the signs of differences without assuming any particular distribution.

Obstacle Courses

Physical or metaphorical challenges composed of multiple obstacles that require agility, strength, and strategic thinking to navigate or overcome.

Nonparametric Tests

Statistical tests that do not assume the data being analyzed follows a particular distribution, often used when data doesn't meet the assumptions of parametric tests.

Z-statistic

A measure that describes how far a data point is from the mean, expressed in units of standard deviation.