Wade and Paul Form Swan Corporation with the Following Investments

question 1

Multiple Choice

Wade and Paul form Swan Corporation with the following investments. Wade transfers machinery (basis of $40,000 and fair market value of $100,000) , while Paul transfers land (basis of $20,000 and fair market value of $90,000) and services rendered (worth $10,000) in organizing the corporation. Each is issued 25 shares in Swan Corporation. With respect to the transfers:

• A) Wade has no recognized gain? Paul recognizes income/gain of $80,000.
• B) Neither Wade nor Paul has recognized gain or income on the transfers.
• C) Swan Corporation has a basis of $30,000 in the land transferred by Paul.
• D) Paul has a basis of $30,000 in the 25 shares he acquires in Swan Corporation.
• E) None of the above.

---

Definitions:

Hernia

A medical condition where an organ or fatty tissue squeezes through a weak spot in the surrounding muscle or connective tissue.

Abdominal Muscles

A group of muscles located in the abdomen that supports the trunk, allows movement and holds organs in place by regulating internal abdominal pressure.

Bowel Protruding

A medical condition where part of the intestine bulges through a weakened area of the abdominal wall.

Umbilical Cord

The flexible cordlike structure connecting a fetus in the womb to the placenta, transporting nutrients and oxygen from the mother and removing waste products.