Seoyun and Nicole Form Indigo Corporation with the Following Transfers

Multiple Choice

Seoyun and Nicole form Indigo Corporation with the following transfers: inventory from Seoyun (basis of $360,000 and fair market value of $400,000) and improved real estate from Nicole (basis of $320,000 and fair market value of $375,000) . Nicole, an accountant, agrees to contribute her services (worth $25,000) in organizing Indigo. The corporation's stock is distributed equally to Seoyun and Nicole. As a result of these transfers:

A) Indigo can deduct $25,000 as a business expense.
B) Nicole has a recognized gain of $55,000 on the transfer of the real estate.
C) Indigo has a basis of $360,000 in the inventory.
D) Indigo has a basis of $375,000 in the real estate.
E) None of these.