2. Gearty and Olinto organized The Worthington Corp., which issued voting common stock with a fair market

Question:

2. Gearty and Olinto organized The Worthington Corp., which issued voting common stock with a fair market value of $240,000. They each transferred property in exchange for stock as follows:

Property Adjusted Basis Fair Market Value Percentage of The Worthington Corp. Stock Acquired Gearty Building $80,000 $164,000 60%

Olinto Land 10,000 96,000 40%

The building was subject to a $20,000 mortgage that was assumed by The Worthington Corp. What amount of gain did Gearty recognize on the exchange?

a. $0

b. $20,000

c. $84,000

d. $104,000

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