Fundamentals of Taxation 2011 4th Edition by Ana Cruz, Debra Prendergast, Dan Schisler, Michael Deschamps

Exercise 14

Tameka and Janelle form a corporation in which each will own 50% of the stock. Tameka contributes $50,000 in cash. Janelle contributes property with a basis of $30,000 and a FMV of $60,000. She receives $10,000 of inventory from the corporation. Which of the following statements is true? a. Janelle will report a gain of $10,000.
B) Janelle will report a gain of $30,000.
C) Tameka will report a gain of $10,000.
D) Neither Tameka nor Janelle will report a gain or loss as a result of these transactions.