Joe and Kay form Gull Corporation.Joe transfers cash of $250,000 for 200 shares in Gull Corporation.Kay transfers property with a basis of $50,000 and fair market value of $240,000.She agrees to accept 200 shares in Gull Corporation for the property and for providing bookkeeping services to the corporation in its first year of operation.The value of Kay's services is $10,000.With respect to the transfer:
A)Gull Corporation has a basis of $240,000 in the property transferred by Kay.
B)Neither Joe nor Kay recognizes gain or income on the exchanges.
C)Gull Corporation has a business deduction under § 162 of $10,000.
D)Gull capitalizes $10,000 as organizational costs.
E)None of the above.

Question

Quizplus · Accepted Answer

Gull Corporation can deduct the $10,000 as a business expense under § 162 for the bookkeeping services provided by Kay.

Joe and Kay Form Gull Corporation