Mr. Jamail transferred business personalty (FMV $187,000; adjusted tax basis $29,900) to J&K Inc. in exchange for J&K common stock. Which of the following statements is true?
A. If Mr. Jamail owns 14% of J&K's outstanding stock immediately after the exchange, he must recognize a $157,100 gain.
B. If Mr. Jamail owns 74% of J&K's outstanding stock immediately after the exchange, he must recognize a $157,100 gain.
C. If Mr. Jamail owns 81% of J&K's outstanding stock immediately after the exchange, he must recognize a $157,100 gain.
D. Statements A and B are true.
Answer: D
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