Kevin and Nicole form Indigo Corporation with the following transfers: inventory from Kevin (basis of $360,000 and fair market value of $500,000, subject to a lien for a loan of $100,000 used to finance the acquisition of the inventory) and improved real estate from Nicole (basis of $320,000 and fair market value of $375,000). Nicole, an accountant, agrees to contribute her services (worth $25,000) in organizing Indigo. Each receives 100 shares of stock. As a result of these transfers:

a. Indigo can deduct $25,000 as a business expense.

b. Nicole has a recognized gain of $55,000 on the transfer of the real estate.

c. Indigo has a basis of $260,000 in the inventory.

d. Indigo has a basis of $375,000 in the real estate.

e. Indigo has an organizational expenditure of $25,000 that must be capitalized, and which it may elect to deduct up to a maximum amount of $5,000 immediately and to amortize the remainder.

Answer rating: 100% (QA)

The correct option is C Indigo Corpor... View the full answer