Sarah and Tony (Mother and Son) Form Dove Corporation with the Following

question 30

Multiple Choice

Sarah and Tony (mother and son) form Dove Corporation with the following investments: cash by Sarah of $55,000; land by Tony (basis of $35,000 and fair market value of $45,000) . Dove Corporation issues 200 shares of stock, 100 each to Sarah and Tony. Thus, each receives stock in Dove worth $50,000.

• A) Section 351 cannot apply since Sarah should have received 110 shares instead of only 100.
• B) As a result of the transfer, Tony recognizes a gain of $10,000.
• C) Tony's basis in the stock of Dove Corporation is $50,000.
• D) Section 351 may apply because stock need not be issued to Sarah and Tony in proportion to the value of the property transferred.
• E) None of the above.

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Definitions:

Referent Power

A form of influence based on the leader's personal traits, attracting followers who identify with or admire the leader.

Exchange

The act of trading goods, services, or ideas between two parties.

Core Tactic

The primary or most essential strategy used to achieve an objective.

Consultation

The process of seeking expertise and advice from others to inform decision-making or to enhance understanding.