Business, 19.02.2021 16:30, ashantajohnson6810

Dawn, a sole proprietor, was engaged in a service business and reported her income on a cash basis. In 2018, she incorporated her business by transferring the assets of the business to a new corporation in return for all the stock in the corporation plus the corporationâ€™s assumption of the liabilities of her proprietorship. All the receivables and the unpaid trade payables were transferred to the new corporation. The assets of the proprietorship had total basis of $125,000 and total fair market value of $300,000. The trade accounts payable assumed by the corporation totaled $35,000, and were for services rendered by third parties directly to customers of the business under Dawnâ€™s supervision. The corporation also assumed a note payable to the bank, in the amount of $95,000. The note was issued for a loan used to purchase computers and other business equipment used in the business and transferred to the corporation. a. Dawn has a taxable gain on the transfer of $5,000.

b. Dawn has a basis of $20,000 in the stock she receives.

c. Dawn has a basis of $10,000 in the stock she receives.

d. Dawn has a basis of $30,000 in the stock she receives.

e. Dawn has a basis of $235,000 in the stock she receives.

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Dawn, a sole proprietor, was engaged in a service business and reported her income on a cash basis....