Rob and Yi Form Bluebird Corporation with the Following Investments

Multiple Choice

Rob and Yi form Bluebird Corporation with the following investments. $\begin{array}{lll}&&\text { Fair Market }\\&\text { Adjusted Basis }&\text { Value }\\ \text { From Rob-Cash}&\$400,000&\$400,000\\ \text { From Yi -Land}&500,000&440,000\\\end{array}$
Each receives 50% of Bluebird's stock. In addition, Yi receives cash of $40,000. One result of these transfers is that Yi has a:

A) Recognized loss of $60,000.
B) Recognized loss of $20,000.
C) Basis of $460,000 in the Bluebird stock assuming Bluebird reduces its basis in the land to $440,000) .
D) Basis of $400,000 in the Bluebird stock assuming Bluebird reduces its basis in the land to $440,000) .
E) None of these.