Gabriella and Juanita form Luster Corporation. Gabriella transfers cash of $40,000 and property with a basis of
Question:
Gabriella and Juanita form Luster Corporation. Gabriella transfers cash of $40,000 and property with a basis of $5,000 and a market value of $20,000 for 6,000 shares of stock. Juanita contributes services worth $15,000 and cash of $5,000 for 2,000 shares of stock. These are the only contributions to the corporation at formation. Pick the most accurate statement for the treatment of this transaction.
Question options:
Gabriella's transfer is tax free. Juanita's receipt of stock for services is taxable but the transferors meet the control requirement because Juanita contributes a sufficient amount of property in the transaction. | |
Both transfers are taxable | |
Neither of the above |
Fundamental financial accounting concepts
ISBN: 978-0078025365
8th edition
Authors: Thomas P. Edmonds, Frances M. Mcnair, Philip R. Olds, Edward