Four individuals form Chickadee Corporation under § 351. Two of these individuals, Jane and Walt, made the following contributions:
Adjusted Basis
Fair Market
Value
From Jane- Cash$360,000
$360,000
Patent-0-
40,000
From Walt- Equipment (depreciation claimed of $100,000)240,000
370,000
?
Both Jane and Walt receive stock in Chickadee Corporation equal to the value of their investments.
A. Jane must recognize income of $40,000; Walt has no income.
B. Neither Jane nor Walt recognize income.
C. Walt must recognize income of $130,000; Jane has no income.
D. Walt must recognize income of $100,000; Jane has no income.
E. None of these.
Answer: B
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