Mercedes incorporates her Sole Proprietorship, transferring its assets to a newly formed Casey Corporation. The assets transferred have an Adjusted Basis of $200,000 and a Fair Market Value of $420,000. Also transferred was $50,000 in liabilities, $40,000 of which was for personal (non-business) purposes and the remaining $10,000 being business related. In return for these transfers, Mercedes receives all of the stock in Casey Corporation. Which of the following is correct?

Casey Corporation will have a basis of $250,000 in the property transferred.Mercedes' basis in the Casey Corporation stock will be $250,000.Mercedes' basis in the CaseyCorporation stock will be $240,000.Casey Corporation will have a basis of $200,000 in the property transferred