Individuals A, B, C, and D form X Corporation and transfer the following items. Individual A transferred accounts receivable that he was entitled to receive from providing services to a customer. The accounts receivable had a basis of $0 and a fair market value of $25. Individual B transferred equipment with a basis of $10 and a fair market value of $25. Individual C transferred a building with a basis of $15, a FMV of $45 and subject to a $20 mortgage, and C transferred a note that C agreed to be secondarily liable on the note if X Corporation does not pay. Individual D transferred $25 in cash.

What are the tax consequences to C.

	A.	The Note increases C's basis to $20, because the corporation has basis in the Note because it took the assets with a liability (the Note). Therefore, C recognizes no gain on the transaction. C's basis in the stock is $20. X Corporation's basis in the asset is $20.
	B.	The Note increases C's basis to $20, because C's Note has a basis of the face value of the Note, since C has liability for the Note. Therefore, C recognizes no gain on the transaction. C's basis in the stock is $20. X Corporation's basis in the asset is $20.
	C.	Neither A or B
	D.	Both B and C depending on the Circuit the taxpayer is in.