Problem:
Joe and Kay form Gull Corporation. Joe transfers cash of $250,000 for 200 shares in Gull Corporation. Kay transfers property with a basis of $50,000 and fair market value of $240,000. She agrees to accept 200 shares in Gull Corporation for the property and for providing bookkeeping services to the corporation in its first year of operation. The value of Kay's services is $10,000. With respect to the transfer:
a. Gull Corporation has a basis of $240,000 in the property transferred by Kay.
b. Neither Joe nor Kay recognize gain on the exchanges.
c. Gull Corporation has a business deduction under § 162 of $10,000.
d. Gull capitalizes $10,000 as organizational costs.
e. None of the above.