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Leah transfers equipment (basis of $400,000 and fair market value of $500,000) for additional stock in Crow Corporation. After the transfer, Leah owns 80% of Crow's stock. Associated with the equipment is Section 1245 depreciation recapture potential of $70,000. As a result of the transfer,         Leah recognizes ordinary income of $70,000.       the Section 1245 depreciation recapture potential carries over to Crow Corporation.       the Section 1245 depreciation recapture potential disappears.       Leah recognizes ordinary income of $70,000 and 1231 gain of $30,000.       None of the above

Leah transfers equipment (basis of $400,000 and fair market value of $500,000) for additional stock in Crow Corporation. After the transfer, Leah owns 80% of Crow's stock. Associated with the equipment is Section 1245 depreciation recapture potential of $70,000. As a result of the transfer,         Leah recognizes ordinary income of $70,000.       the Section 1245 depreciation recapture potential carries over to Crow Corporation.       the Section 1245 depreciation recapture potential disappears.       Leah recognizes ordinary income of $70,000 and 1231 gain of $30,000.       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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Leah transfers equipment (basis of $400,000 and fair market value of $500,000) for additional stock in Crow Corporation. After the transfer, Leah owns 80% of Crow's stock. Associated with the equipment is Section 1245 depreciation recapture potential of $70,000. As a result of the transfer, 

       Leah recognizes ordinary income of $70,000.
       the Section 1245 depreciation recapture potential carries over to Crow Corporation.
       the Section 1245 depreciation recapture potential disappears.
       Leah recognizes ordinary income of $70,000 and 1231 gain of $30,000.
       None of the above

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