1.Danielle, a sole proprietor, was engaged in a service business and reported her income on a cash basis. Later, she incorporates her business and transfers the assets of the business to the corporation in return for all the stock in the corporation plus the corporations assumption of the liabilities of her proprietorship. All the receivables and the unpaid trade payables are transferred to the newly formed corporation. The assets of the proprietorship had a basis of $105,000 and fair market value of $300,000. The trade accounts payable totaled $25,000. There was a note payable to the bank in the amount of $95,000 that the corporation assumes. The note was issued for the purchase of computers and other business equipment.

	a.	Danielle has a gain on the transfer of $15,000.
	b.	The basis of the assets to the corporation is $300,000.
	c.	Danielle has a basis of $10,000 in the stock she receives.
	d.	Danielle has a zero basis in the stock she receives.

2.

Bishop Corporation reports taxable income of $700,000 on its tax return. Given the following information from the corporation's records, determine Bishop's net income per its financial accounting records.

Deduction for federal income taxes per books	$240,000
Depreciation claimed on the tax return	135,000
Depreciation reported on the financial accounting books	75,000
Life insurance proceeds on death of a corporate officer	100,000

	a.	$560,000
	b.	$620,000
	c.	$660,000
	d.	$520,000