Question 25 Tom and George form T and G Corporation. Tom transfers machinery wor

Question

Question 25 Tom and George form T and G Corporation. Tom transfers machinery worth $100,000 with a basis to Tom of $40,000, while George transfers land worth $90,000 with a basis to George of $20,000 and services rendered in organizing the corporation worth $10,000. Each is issued 25 shares in T and G Corporation. With respect to the transfers:

A. Tom has no recognized gain; George recognizes gain/income of $80,000.

B. Neither Tom nor George recognizes gain or income.

C. T and G Corporation has a basis of $30,000 in the land.

D. George has a basis of $30,000 in the shares of T & G Corporation.

Explanation / Answer

The correct answer is D. George has a basis of $30,000 in the shares of T & G Corporation.

Since, George transferred land with basis of $20,000 & rendered servicesworth $10,000, he has a basis of $30,000 in the share of T & G Corporation.The details required to calculate gain from the transfer is not available in the question hence, D is the correct answer.

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