Matthew and Gabriella form Epsilon Corporation. Matthew transfers property (basis of $50,000 and fair market value of $40,000) while Gabriella transfers land (basis of $25,000 and fair market value of $30,000) and $10,000 in cash. Each receives 50% of Epsilon Corporation's stock, which is worth a total of $80,000. As a result of these transfers: None of the above Matthew has no recognized loss, but Gabriella a recognized gain of $10,000. Epsilon Corporation will have a basis in the land of $30,000. Neither Matthew nor Gabriella has any recognized gain or loss. Matthew has a recognized loss of $10,000, and Gabriella has a recognized gain of $15,000.

In the given question fair market value will be considered for the purpose of calculating gain or…

Answered: Matthew and Gabriella form Epsilon…

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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Matthew and Gabriella form Epsilon Corporation. Matthew transfers property (basis of $50,000 and fair market value of $40,000) while Gabriella transfers land (basis of $25,000 and fair market value of $30,000) and $10,000 in cash. Each receives 50% of Epsilon Corporation's stock, which is worth a total of $80,000. As a result of these transfers:

		None of the above
		Matthew has no recognized loss, but Gabriella a recognized gain of $10,000.
		Epsilon Corporation will have a basis in the land of $30,000.
		Neither Matthew nor Gabriella has any recognized gain or loss.
		Matthew has a recognized loss of $10,000, and Gabriella has a recognized gain of $15,000.