Reference no: EM133111816
Question - Dr. Cole M.D has practiced medicine as a sole proprietorship for many years. During Jan 2021, Dr Cole, who uses the cash method of accounting decided to incorporate his practice in order to achieve limited liability. In exchange for stock, Dr Cole transferred the following assets and liabilities
Cash: $40,000
Unrealized accounts receivable: 300,000
Equipment (basis): 10,000
Building (basis): 50,000
Accounts payable (for routine deductible expenditures): 150,000
Required - What is Dr Cole's recognized gain and basis in his stock following the transfer?
a. $0 gain recognized and $100,000 basis in stock
b. $0 gain recognized and $0 basis in stock
c. $50,000 gain recognized and $0 basis in stock
d. $0 gain recognized and $250,000 basis in stock
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