Question

Mitchell and Powell form Green Corporation. Mitchell transfers property (basis of $105,000 and fair market value of $90,000) while Powell transfers land (basis of $8,000 and fair market value of $75,000) and $15,000 of cash. Each receives 50% of Green Corporation’s stock (total value of $180,000). As a result of these transfers:A. Mitchell has a recognized loss of $15,000, and Powell has a recognized gain of $67,000. B. Neither Mitchell nor Powell has any recognized gain or loss. C. Mitchell has no recognized loss, but Powell has a recognized gain of $15,000. D. Green Corporation will have a basis in the land of $23,000. E. None of the above.

Answer 1

B) Neither Mitchell nor Powell has any recognized gain or loss.

Step-by-step explanation:

Section 351 (a) of the IRS code establishes that when:

• property is transferred to a corporation by a shareholder solely in exchange for stocks of the corporation,
• and the person (or people) that transferred the property take immediate control of the corporation,

no gain or loss can be recognized from that transaction.