Sam has a recognized loss of $65,000, and Fran has a recognized gain of $110,000

Question

       Sam has a recognized loss of $65,000, and Fran has a recognized gain of $110,000.
       Neither Sam nor Fran has any recognized gain or loss.
       Sam has no recognized loss, but Fran has a recognized gain of $110,000.
       Brown Corporation will have a basis in the land of $190,000.
       None of the above

Sam and Fran form Brown Corporation. Sam transfers property (basis of $265,000 and fair market value of $200,000), and Fran transfers land (basis of $80,000 and fair market value of $190,000) and $10,000 cash. Each receives 50% of Brown Corporation's stock, which is worth a total of $400,000. Which of the following is the result of these transfers? (Points : 5)

Explanation / Answer

Sam and Fran form Brown Corporation. Sam transfers property (basis of $265,000 and fair market value of $200,000), and Fran transfers land (basis of $80,000 and fair market value of $190,000) and $10,000 cash. Each receives 50% of Brown Corporation's stock, which is worth a total of $400,000,

As a result of this transaction, Sam has a recognized loss of $65,000 and Fran has a recognized gain of $110,000.

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