Rick Transferred the Following Assets and Liabilities to Warbler Corporation

question 50

Multiple Choice

Rick transferred the following assets and liabilities to Warbler Corporation.
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In return, Rick received $75,000 in cash plus 90% of Warbler Corporation's only class of stock outstanding (fair market value of $225,000) .

• A)Rick has a recognized gain of $60,000.
• B)Rick has a recognized gain of $75,000.
• C)Rick's basis in the stock of Warbler Corporation is $270,000.
• D)Warbler Corporation has the same basis in the assets received as Rick does in the stock.
• E)None of the above.

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Definitions:

Employment Act

A piece of legislation aimed at promoting high employment levels, economic growth, and stable prices within an economy.

Monetary Policy

The process by which the central bank, or monetary authority of a country, controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.

Full Employment

A situation in an economy where all available labor resources are being used in the most efficient way, typically with only natural unemployment remaining.

Marginal Propensity

Measures the portion of additional income that an individual or entity spends on consuming goods rather than saving.