Question

Gabriella and Juanita form Luster Corporation. Gabriella transfers cash of $50,000 for 50 shares of stock, and Juanita transfers information concerning a proprietary process copyright (basis of zero and fair market value of $50,000) for 50 shares of stock. Group of answer choices Neither Gabriella nor Juanita will recognize gain on the transfer. Because Juanita is required to recognize gain on the transfer, Gabriella also must recognize gain. Juanita must recognize gain of $50,000. The transfers to Luster are fully taxable to both Gabriella and Juanita.

Answer 1

Answer: Neither Gabriella nor Juanita will recognize gain on the transfer.

Step-by-step explanation:

Gabriella made no gain on the transfer as she transferred the same amount of cash the stock was worth and received no benefits.

Juanita also transferred an Intangible Asset that was worth the same amount of money as the shares that she bought for them meaning no benefits accrue either and therefore no gain is recognized.