Hunter and Warren form Tan Corporation. Hunter transfers equipment (basis of $210,000 and fair market value of $180,000) while Warren transfers land (basis of $15,000 and fair market value of $150,000) and $30,000 of cash. Each receives 50% of Tan's stock. As a result of these transfers:
A) Hunter has a recognized loss of $30,000, and Warren has a recognized gain of $135,000.
B) Neither Hunter nor Warren has any recognized gain or loss.
C) Hunter has no recognized loss, but Warren has a recognized gain of $30,000.
D) Tan Corporation will have a basis in the land of $45,000.
E) None of the above.

Question

Quizplus · Accepted Answer

Under IRC Section 351, no gain or loss is recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control of the corporation. Both Hunter and Warren meet these requirements, so neither recognizes gain or loss.

Hunter and Warren Form Tan Corporation