Hunter and Warren Form Tan Corporation

question 85

Multiple Choice

Hunter and Warren form Tan Corporation. Hunter transfers equipment (basis of $210,000 and fair market value of $180,000) while Warren transfers land (basis of $15,000 and fair market value of $150,000) and $30,000 of cash. Each receives 50% of Tan's stock. As a result of these transfers:

• A) Hunter has a recognized loss of $30,000; Warren has a recognized gain of $135,000.
• B) Neither Hunter nor Warren has any recognized gain or loss.
• C) Hunter has no recognized loss; Warren has a recognized gain of $30,000.
• D) Tan Corporation has a basis in the land of $45,000.
• E) None of the above.

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Definitions:

Fundamental Analysts

Financial experts who evaluate investments based on fundamental factors such as earnings, dividends, and the financial health of companies.

Profitability

The financial metric that measures the degree to which a company or project generates profit compared to its revenues, costs, or investments.

Market Consensus Value

The average value or price of a security as agreed upon by market participants, often considered as the most probable price in the marketplace.

Required Return

The minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project.