During the year, R and S established T Corporation, which issued 100 shares of stock.R transferred land worth $9,000 (basis $8,000) to the corporation for 90 shares of stock while S contributed services worth $1,000 for 10 shares of stock.Neither R nor S must recognize income due to their respective transfers.

Question

Quizplus · Accepted Answer

R does not have to recognize income because the transfer of property (land) for stock is generally non-taxable if the transferors are in control of the corporation immediately after the exchange. However, S must recognize income for the services rendered in exchange for stock, as the transfer of services for stock is considered taxable compensation.

During the Year, R and S Established T Corporation, Which