Erica transfers land worth $500,000, basis of $100,000, to a newly formed corpor
ID: 2494753 • Letter: E
Question
Erica transfers land worth $500,000, basis of $100,000, to a newly formed corporation, Robin Corporation, for all of Robin’s stock, worth $300,000, and a 10-year note. The note was executed by Robin and made payable to Erica in the amount of $200,000. As a result of the transfer:
a.
Erica does not recognize gain.
b.
Erica recognizes gain of $400,000.
c.
Robin Corporation has a basis of $100,000 in the land.
d.
Robin Corporation has a basis of $300,000 in the land.
e.
None of the above.
a.
Erica does not recognize gain.
b.
Erica recognizes gain of $400,000.
c.
Robin Corporation has a basis of $100,000 in the land.
d.
Robin Corporation has a basis of $300,000 in the land.
e.
None of the above.
Explanation / Answer
correct option is "B" -Erica recognizes gain of $400,000.
[Gain = 500000-100000 = 400000]
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