Sarah and Emily Form Red Corporation with the Following Investments

question 68

Multiple Choice

Sarah and Emily form Red Corporation with the following investments: Sarah transfers computers worth $200,000 (basis of $80,000) , while Emily transfers real estate worth $180,000 (basis of $40,000) and services (worth $20,000) rendered in organizing the corporation. Each is issued 600 shares in Red Corporation. With respect to the transfers:

• A) Sarah has no recognized gain; Emily recognizes income/gain of $160,000.
• B) Neither Sarah nor Emily recognizes gain or income.
• C) Red Corporation has a basis of $60,000 in the real estate.
• D) Emily has a basis of $60,000 in the shares of Red Corporation.
• E) None of the above.

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Definitions:

Latency

A period of inactivity or delay before a process or response initiates following a stimulus.

Imperative

Something that is required or absolutely necessary; a principle or command that needs to be followed.

Functional Unity

The concept that all aspects of a society or system work together in an interrelated manner to ensure stability and continuity.

Robert Merton

An influential American sociologist known for developing theories on social structure, anomie, and for the concept of self-fulfilling prophecy, among other contributions to sociology.