1. Eileen transfers property worth $200,000 (basis of $190,000) to Goldfinch Corporation. In return, she receives 80% of the stock in Goldfinch Corporation (fair market value of $180,000) and a long-term note (fair market value of $20,000) executed by Goldfinch and made payable to Eileen. Eileen recognizes gain on the transfer of: a. $0. b. $10,000. c. $20,000. d. $190,000. e. None of the above.

2. 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.

3. Three individuals form Skylark Corporation with the following contributions: Cliff, cash of $50,000 for 50 shares; Brad, land worth $20,000 (basis of $11,000) for 20 shares; and Ron, cattle worth $9,000 (basis of $6,000) for 9 shares and services worth $21,000 for 21 shares. a. These transfers are fully taxable and not subject to 351. b. Rons basis in his stock is $27,000. c. Rons basis in his stock is $6,000. d. Brads basis in his stock is $20,000. e. None of the above.

4. Kevin and Nicole form Indigo Corporation with the following transfers: inventory from Kevin (basis of $360,000 and fair market value of $400,000) and improved real estate from Nicole (basis of $320,000 and fair market value of $375,000). Nicole, an accountant, agrees to contribute her services (worth $25,000) in organizing Indigo. The corporations stock is distributed equally to Kevin and Nicole. As a result of these transfers: a. Indigo can deduct $25,000 as a business expense. b. Nicole has a recognized gain of $55,000 on the transfer of the real estate. c. Indigo has a basis of $360,000 in the inventory. d. Indigo has a basis of $375,000 in the real estate. e. None of the above.

5. Ann transferred land worth $200,000, with a tax basis of $40,000, to Brown Corporation, an existing entity, for 100 shares of its stock. Brown Corporation has two other shareholders, Bill and Bob, each of whom holds 100 shares. With respect to the transfer: a. Ann has no recognized gain. b. Brown Corporation has a basis of $160,000 in the land. c. Ann has a basis of $200,000 in her 100 shares in Brown Corporation. d. Ann has a basis of $40,000 in her 100 shares in Brown Corporation. e. None of the above.

6. Dick, a cash basis taxpayer, incorporates his sole proprietorship. He transfers the following items to newly created Orange Corporation.

Adjusted

Fair Market

Basis

Value

Cash

$ 10,000

$ 10,000

Building

120,000

175,000

Mortgage payable (secured by the building and held for 15 years)

135,000

135,000

With respect to this transaction: a. Orange Corporations basis in the building is $120,000.

b. Dick has no recognized gain.

c. Dick has a recognized gain of $5,000.

d. Dick has a recognized gain of $10,000.

e. None of the above.

7. Albert transfers land (basis of $140,000 and fair market value of $320,000) to Gold Corporation for 80% of its stock and a note payable in the amount of $80,000. Gold assumes Alberts mortgage on the land of $200,000. a. Albert has a recognized gain on the transfer of $140,000. b. Albert has a recognized gain on the transfer of $80,000. c. Albert has a recognized gain on the transfer of $60,000. d. Gold Corporation has a basis in the land of $220,000. e. None of the above.

8. Rachel owns 100% of the stock of Cardinal Corporation. In the current year Rachel transfers an installment obligation, tax basis of $180,000 and fair market value of $350,000, for additional stock in Cardinal worth $350,000. a. Rachel has a taxable gain of $180,000. b. Rachel has a taxable gain of $170,000. c. Rachel recognizes no taxable gain on the transfer. d. Rachel has a basis of $350,000 in the additional stock she received in Cardinal Corporation. e. None of the above.

9. Rob and Fran form Bluebird Corporation with the following investments.

Adjusted Fair Market Basis Value

From Rob Cash $400,000 $400,000

From Fran Land 500,000 440,000

Each receives 50% of Bluebirds stock. In addition, Fran receives cash of $40,000. One result of these transfers is that Fran has a: a. Recognized loss of $60,000. b. Recognized loss of $20,000. c. Basis of $460,000 in the Bluebird stock (assuming Bluebird reduces its basis in the land to $440,000). d. Basis of $400,000 in the Bluebird stock (assuming Bluebird reduces its basis in the land to $440,000). e. None of the above.

10.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.

11.Rick transferred the following assets and liabilities to Warbler Corporation.

Adjusted Basis

Fair Market Value

Building

$210,000

$225,000

Equipment

45,000

75,000

Trucks

15,000

30,000

Mortgage (held for four years) on building

30,000

30,000

In return, Rick received $75,000 in cash plus 90% of Warbler Corporations 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. Ricks 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.