Rick transferred the following assets and liabilities to Warbler Corporation. In return, Rick received $75,000 in cash plus 90% of Warbler Corporation's only class of stock outstanding (fair market value of $225,000).
A)Rick has a recognized gain of $60,000.
B)Rick has a recognized gain of $75,000.
C)Rick's basis in the stock of Warbler Corporation is $270,000.
D)Warbler Corporation has the same basis in the assets received as Rick does in the stock.
E)None of these.

Question

Rick transferred the following assets and liabilities to Warbler Corporation.  In return, Rick received $75,000 in cash plus 90% of Warbler Corporation's only class of stock outstanding (fair market value of $225,000).
A)Rick has a recognized gain of $60,000. 
B)Rick has a recognized gain of $75,000. 
C)Rick's basis in the stock of Warbler Corporation is $270,000. 
D)Warbler Corporation has the same basis in the assets received as Rick does in the stock. 
E)None of these.

Quizplus · Accepted Answer

The Answer of Rick transferred the following assets and liabilities to Warbler Corporation.  In return, Rick received $75,000 in cash plus 90% of Warbler Corporation's only class of stock outstanding (fair market value of $225,000).
A)Rick has a recognized gain of $60,000. 
B)Rick has a recognized gain of $75,000. 
C)Rick's basis in the stock of Warbler Corporation is $270,000. 
D)Warbler Corporation has the same basis in the assets received as Rick does in the stock. 
E)None of these.

Rick Transferred the Following Assets and Liabilities to Warbler Corporation