Sami Transferred Property with a Fair Market Value of $600

question 94

Multiple Choice

Sami transferred property with a fair market value of $600 and a tax basis of $300 to a corporation in exchange for stock with a fair market value of $600. In addition, Sami received stock with a fair market value of $50 in exchange for services she provided to the corporation in the incorporation process. Which of the following statements best describes the tax result to Sami because of the exchanges?

• A) Sami will recognize $50 of compensation income, but she can count the shares of stock she receives in exchange for services in determining if the control test is met under section 351.
• B) Sami will recognize $50 of compensation income, but she cannot count the shares of stock she receives in exchange for services in determining if the control test is met under section 351.
• C) Sami will not recognize $50 of compensation income, but she can count the shares of stock she receives in exchange for services in determining if the control test is met under section 351.
• D) Sami will not recognize $50 of compensation income, and she cannot count the shares of stock she receives in exchange for services in determining if the control test is met under section 351.

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Definitions:

Company Name

The legally registered name under which a company operates and is known by its customers and the public.

Chief Communications Officer

A senior executive responsible for managing and directing an organization's internal and external communications strategies and efforts.

Public Relations

The method of strategic messaging that enhances reciprocal relations between institutions and their communities.

Public Affairs

A field focused on building and maintaining relationships between an organization and the public, including handling PR, communication strategies, and community engagement.