Martin Operates a Law Practice as a Sole Proprietorship Using

Multiple Choice

Martin operates a law practice as a sole proprietorship using the cash method of accounting. Martin incorporates the law practice and transfers the following items to a new, solely owned corporation. Martin must recognize a gain of ________ and has a stock basis of ________:

A) $0; $30,000
B) $0; $40,000
C) $20,000; $30,000
D) $20,000; $40,000