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1) Mackenzie incorporates her sole proprietorship, transferring it to newly formed Omega Corporation. The assets transferred have an adjusted basis of $300,000 and a fair market value of $400,000. Also transferred was $50,000 in liabilities, $5,000 of which was personal and the balance of $45,000 being business related. In return for these transfers, Mackenzie receives all of the stock in Omega Corporation.

a) Omega Corporation has a basis of $305,000 in the property b) Omega Corporation has a basis of $300,000 in the property c) Mackenzie's basis in the Omega Corporation stock is $300,000 d) Mackenzie's basis in the Omega Corporation stock is $340,000 e) none of the above

2) 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:

a) Matthew has no recognized loss, but Gabriella a recognized gain of $10,000 b) Epsilon Corporation will have a basis in the land of $30,000 c) Neither Matthew nor Gabriella has any recognized gain or loss d) Matthew has a recognized loss of $10,000, and Gabriella has a recognized gain of $15,000 e) none of the above

3) For 351 purposes, stock warrants are included in the definition of "stock." True or False

4) In order to retain the services of Paige, a key employee in Byron's sole proprietorship, Byron contracts with Paige to make her a 30% owner. Byron incorporates the business receiving in return 100% of the stock. Three days later, Byron transfers 30% of the stock to Paige. Under these circumstances, 351 will apply to the incorporation of Byron's business. True or False

5) When a taxpayer incorporates her business, she transfers several liabilities to the corporation. If one of the liabilities is personal in origin, only that liability will be treated as boot. True or False

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