Kathleen Transferred the Following Assets to Mockingbird Corporation

question 83

Multiple Choice

Kathleen transferred the following assets to Mockingbird Corporation. In exchange,Kathleen received 40% of Mockingbird Corporation's only class of stock outstanding.The stock has no established value.However,all parties sincerely believe that the value of the stock Kathleen received is the equivalent of the value of the assets she transferred.The only other shareholder,Rick,formed Mockingbird Corporation five years ago.

• A) Kathleen has no gain or loss on the transfer.
• B) Mockingbird Corporation has a basis of $48,000 in the equipment and $108,000 in the land.
• C) Kathleen has a basis of $256,000 in the stock of Mockingbird Corporation.
• D) Mockingbird Corporation has a basis of $36,000 in the equipment and $144,000 in the land.
• E) None of the above.

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Definitions:

Human Capital

The combined abilities, expertise, and non-physical assets belonging to people that can generate economic benefits for themselves, their place of work, or their local area.

Natural Resources

Environmental assets such as minerals, woodlands, bodies of water, and cultivable land, available in nature and exploitable for economic growth.

Financial Institutions

Organizations that provide financial services, such as banks, insurance companies, and stock exchanges.

Capital Infrastructure

Fundamental facilities and systems serving a country, city, or area, including transportation, communications, sewage, water, and electric systems, that are necessary for economic activity.