and services rendered (worth $10,000) in organizing the corporation. Each is issued 25 shares in Swan Corporation. With respect to the transfers: a. Dwayne has no recognized gain; Paul recognizes income/gain of $80,000. b. Neither Dwayne 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. Paul has a basis of $30,000 in the 25 shares he acquires in Swan Corporation. 38. South, Inc., carns book net income before tax of $400,000 in year 1. It acquires a depreciable asset in year 1, and its first-year tax depreciation exceeds book depreciation by $50,000. In year 2, South earns $500,000 book net income before tax, and its book depreciation exceeds tax depreciation by $20,000. South records no other temporary or permanent book-tax differences. Assuming that the applicable tax rate is 21% in both years, what is South's balance in its deferred tax liability account at the end of year 2? a. $0 b. $4,200 c. $6,300 d. $10,500 39. Jane transfers property (basis of $180,000 and fair market value of $500,000) to Green Corporation for 80% of its stock (worth $425,000) and a long-term note (worth $75,000) executed by Green Corporation and made payable to Jane. As a result of the transfer: Copyright Cengage Learning. Powered by Cognero Page 8