Gabriella and Juanita Form Luster Corporation

question 73

Multiple Choice

Gabriella and Juanita form Luster Corporation. Gabriella transfers cash of $50,000 for 50 shares of stock, while Juanita transfers information concerning a proprietary process (basis of zero and fair market value of $50,000) for 50 shares of stock.

• A) The transfers to Luster are fully taxable to both Gabriella and Juanita.
• B) Juanita must recognize gain of $50,000.
• C) Because Juanita is required to recognize gain on the transfer, Gabriella also must recognize gain.
• D) Neither Gabriella nor Juanita will recognize gain on the transfer.
• E) None of the above.

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Definitions:

Relational De-Escalation

The process of deliberately reducing the intensity or closeness of a relationship, often involving a decrease in communication and emotional involvement.

Leading Lives

refers to the manner in which individuals direct their life courses, make decisions, and pursue their goals.

Property

Refers to anything that is owned or possessed, which can include physical items, intellectual properties, and rights over tangible or intangible assets.

Social Exchange Theory

Theory that claims people make relationship decisions by assessing and comparing the costs and rewards.