Wade and Paul form Swan Corporation with the following investments. Wade transfers machinery (basis of $40,000 and fair market value of $100,000), while Paul transfers land (basis of $20,000 and fair market value of $90,000) and services rendered (worth $10,000) in organizing the corporation. Each is issued 25 shares in Swan Corporation. With respect to the transfers:
a. Wade has no recognized gain; Paul recognizes income/gain of $80,000.
b. Neither Wade nor Paul has recognized gain or income on the transfers.
c. Swan Corporation has a basis of $30,000 in the land transferred by Paul.
d. Paul has a basis of $30,000 in the 25 shares he acquires in Swan Corporation.
e. None of the above.
d
RATIONALE: Wade has no recognized gain on the transfer and Paul recognizes income of $10,000 representing the stock received for services rendered. Swan Corporation has a basis of $40,000 in the machinery and $20,000 in the land. Paul has a basis of $30,000 in the stock in Swan Corporation [$20,000 (basis of land) + $10,000 (income recognized from services rendered)].
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