G owns 85 percent of the stock of X Corporation, and H owns the remaining 15 percent.The corporation has been in operation for three years.During the year, G transferred land worth $20,000 (basis $11,000) to the corporation for a note bearing 10 percent interest and maturing in 15 years.G is not required to recognize gain on the transfer.

Question

Quizplus · Accepted Answer

G must recognize gain on the transfer because the transaction involves a sale of property to the corporation in exchange for a note, which is considered a taxable event. The gain recognized would be the difference between the land's fair market value ($20,000) and its basis ($11,000).

G Owns 85 Percent of the Stock of X Corporation