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.

---

Definitions:

Working

Engaging in a physical or mental activity to achieve an objective, often to earn an income.

Opportunity Cost

The loss of potential gain from other alternatives when one particular option is chosen over others.

Graduate Program

An advanced academic course of study that follows a bachelor's degree, typically culminating in a master's or doctoral degree.

Annual School Expenses

Yearly financial costs associated with education, including tuition, fees, books, and living expenses.