Michael and Freddy form Willow Corporation.Michael transfers property (basis of $175,000 and fair market value of $100,000) while Freddy transfers land (basis of $50,000 and fair market value of $90,000) and $10,000 in cash.Each receives 50% of Willow Corporation's stock, which is worth a total of $200,000.As a result of these transfers:
A) Michael has a recognized loss of $75,000, and Freddy has a recognized gain of $40,000.
B) Neither Michael nor Freddy has any recognized gain or loss.
C) Michael has no recognized loss, but Freddy has a recognized gain of $40,000.
D) Willow Corporation will have a basis in the land of $90,000.
E) None of the above.
Correct Answer:
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