Jermaine owns all 200 shares of Peach Corporation stock valued at $50,000. Kenya, a new

ACC 455 Entire Course Link

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 Jermaine owns all 200 shares of Peach Corporation stock valued at $50,000. Kenya, a new shareholder, receives 200 newly issued shares from Peach Corporation in exchange for inventory with an adjusted basis of $40,000 and an FMV of $50,000. Which of the following statements is correct?



A.

Kenya may defer the recognition of any tax until the stock is sold.



B.

The transaction results in $10,000 of capital gain for Kenya.



C.

The transaction results in $10,000 of ordinary income for Kenya.

 



D.

No gain will be recognized by Kenya.
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