Question: Kinza owns all 250 shares of Gold Corporation stock valued at $100,000. Jimmy, a new shareholder, receives 250 newly issued shares from Gold Corporation in

Kinza owns all 250 shares of Gold Corporation stock valued at $100,000. Jimmy, a new shareholder, receives 250 newly issued shares from Gold Corporation in exchange for inventory with an adjusted basis of $100,000 and an FMV of $125,000. Which of the following statements is correct?

A) No gain will be recognized by Jimmy.

B) The transaction results in $25,000 of capital gain for Jimmy.

C) The transaction results in $25,000 of ordinary income for Jimmy.

D) Jimmy may defer the recognition of any tax until the stock is sold.

Please provide an explanation, thank you!

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