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Emma and Liam form Majestic Corporation. Emma transfers equipment worth $475,000 (basis of $100,000) and cash of $25,000 to Majestic Corporation for 50% of its stock. Liam transfers a building and land worth $525,000 (basis of $200,000) for 50% of Majestic's stock and $25,000 cash. Discuss the result of these transfers. (a)          Emma recognizes a gain of $375,000; Liam recognizes a gain of $325,000. (b)          Emma recognizes a gain of $25,000; Liam recognizes no gain. (c)           Neither Emma nor Liam recognizes gain. (d)          Emma recognizes no gain; Liam recognizes a gain of $25,000. (e)          None of the above

Emma and Liam form Majestic Corporation. Emma transfers equipment worth $475,000 (basis of $100,000) and cash of $25,000 to Majestic Corporation for 50% of its stock. Liam transfers a building and land worth $525,000 (basis of $200,000) for 50% of Majestic's stock and $25,000 cash. Discuss the result of these transfers. (a)          Emma recognizes a gain of $375,000; Liam recognizes a gain of $325,000. (b)          Emma recognizes a gain of $25,000; Liam recognizes no gain. (c)           Neither Emma nor Liam recognizes gain. (d)          Emma recognizes no gain; Liam recognizes a gain of $25,000. (e)          None of the above

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Emma and Liam form Majestic Corporation. Emma transfers equipment worth $475,000 (basis of $100,000) and cash of $25,000 to Majestic Corporation for 50% of its stock. Liam transfers a building and land worth $525,000 (basis of $200,000) for 50% of Majestic's stock and $25,000 cash. Discuss the result of these transfers.

(a)          Emma recognizes a gain of $375,000; Liam recognizes a gain of $325,000.

(b)          Emma recognizes a gain of $25,000; Liam recognizes no gain.

(c)           Neither Emma nor Liam recognizes gain.

(d)          Emma recognizes no gain; Liam recognizes a gain of $25,000.

(e)          None of the above

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