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:

Parol Evidence

A rule that prevents parties to a written contract from presenting extrinsic evidence of terms that would contradict, modify, or vary the contractual terms written in the document.

UCC Statute of Frauds

A section of the Uniform Commercial Code that requires certain types of contracts, such as those for the sale of goods over a certain value, to be in writing to be enforceable.

Specially Manufactured Goods

Items that are produced to a buyer's personal specifications, which are not suitable for sale to others in the ordinary course of the seller's business.

Promissory Estoppel

A legal doctrine that prevents a party from withdrawing a promise made to another party if the latter has relied upon that promise to their detriment.