What respect to the transfers

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Problem 1: Ernie and Matt form ABC Corporation. Ernie transfers property, basis of $200,000 and value of $1,600,000, for 50 shares in ABC Corporation. Matt transfers property, basis of $80,000 and value of $1,480,000, and agrees to serve as manager of ABC for one year; in return Matt receives 50 shares of ABC. The value of Matt's services is $120,000. With respect to the transfers:

A. Matt will not recognize gain or income.
B. Ernie will recognize a gain of $1,400,000.
C. ABC Corporation has a basis of $1,480,000 in the property it received from Matt.
D. ABC will have a business deduction of $120,000 for the value of the services Matt will render.
E. None of the above.

Reference no: EM132731359

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