Kirby and Helen Form Red Corporation

Multiple Choice

Kirby and Helen form Red Corporation. Kirby transfers property, basis of $20,000 and value of $300,000, for 100 shares in Red Corporation. Helen transfers property, basis of $40,000 and value of $280,000, and provides legal services in organizing the corporation. The value of her services is $20,000. In return Helen receives 100 shares in Red Corporation. With respect to the transfers:

A) Kirby will recognize gain.
B) Helen will not recognize any gain or income.
C) Red Corporation will have a basis of $280,000 in the property it acquired from Helen.
D) Red will have a business deduction of $20,000.
E) None of the above.