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).

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).

Quizplus · Accepted Answer

Rick's recognized gain is calculated as the fair market value of the consideration received ($75,000 + $225,000 = $300,000) minus his adjusted basis in the assets transferred ($240,000). Therefore, Rick has a recognized gain of $60,000. The other choices are not correct as they do not reflect the correct tax treatment of the transaction.

Rick Transferred the Following Assets and Liabilities to Warbler Corporation