Joe and Kay Form Gull Corporation

question 44

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 business deduction under § 162 of $10,000.
• D)Gull capitalizes $10,000 as organizational costs.
• E)None of the above.

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Definitions:

Rhinorrhea

The medical term for a condition where there is an excessive discharge of mucus from the nose, often referred to as a runny nose.

Flow

Refers broadly to the movement of a fluid or the process of moving in a steady and continuous manner.

Presbycusis

Age-related hearing loss, a gradual loss of hearing in both ears associated with aging.

Hearing

The physiological process or ability involving the perception of sound.