Rick Transferred the Following Assets and Liabilities to Warbler Corporation

question 78

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:

Document of Title

Legal documentation evidencing a person's right to the control or ownership of goods, typically used in the context of shipping or storage.

Risk of Loss

The potential that an investment's value may decrease, or that one may incur losses from a business transaction.

Lumber

Wood that has been processed into beams and planks, a stage in the process of wood production.

UCC

The Uniform Commercial Code, which is a comprehensive set of laws governing all commercial transactions in the United States.