Gabriella and Maria form Luster Corporation with each receiving 50 shares of its stock. Gabriella transfers cash of $50,000, while Maria transfers a secret process (basis of $0; fair market value of $50,000). Neither Gabriella nor Maria will recognize gain on the transfer.

Question

Quizplus · Accepted Answer

Both cash and property can be contributed to a corporation in exchange for stock without recognizing gain, as long as the transfer meets certain requirements under Internal Revenue Code Section 351. As a result, neither Gabriella nor Maria will recognize gain on the transfer.

Gabriella and Maria Form Luster Corporation with Each Receiving 50