Kirby and Helen Form Red Corporation

question 7

Multiple Choice

Kirby and Helen form Red Corporation. Kirby transfers property, basis of $20,000 and value of $300,000, for 100 shares in Red Corporation. Helen transfers property, basis of $40,000 and value of $280,000, and provides legal services in organizing the corporation. The value of her services is $20,000. In return Helen receives 100 shares in Red Corporation. With respect to the transfers:

• A) Kirby will recognize gain.
• B) Helen will not recognize any gain or income.
• C) Red Corporation will have a basis of $280,000 in the property it acquired from Helen.
• D) Red will have a business deduction of $20,000.
• E) None of the above.

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Definitions:

Isopropyl Alcohol

A colorless, flammable chemical compound with strong antiseptic properties, commonly used as a disinfectant and cleaning agent.

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A test used to measure breathing capacity.

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Apparel that fits very closely to the body, often stretching to conform to the body's shape.

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A device designed to clamp the nostrils closed to prevent the entry of water or to block smells, often used during swimming or in environments with unpleasant odors.