IPM Inc. and Zeta Company formed IPeta Inc. by transferring business assets in exchange for 1,000 shares of IPeta common stock. IPM transferred assets with a $675,000 FMV and a $283,000 adjusted tax basis and received 600 shares. Zeta transferred assets with a $450,000 FMV and a $98,000 adjusted tax basis and received 400 shares. Compute IPM and Zeta's realized and recognized gain on the exchange.
A. IPM realized $392,000 gain and recognized no gain. Zeta realized and recognized $352,000 gain.
B. IPM realized and recognized $392,000 gain. Zeta realized and recognized $352,000 gain.
C. IPM realized $392,000 gain and recognized no gain. Zeta realized $352,000 gain and recognized no gain
D. There is not enough information to compute realized and recognized gain.
Answer: C
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