Gabriella and Juanita Form Luster Corporation

Multiple Choice

Gabriella and Juanita form Luster Corporation.Gabriella transfers cash of $50,000 for 50 shares of stock,while Juanita transfers a secret process (basis of zero and fair market value of $50,000) for 50 shares of stock.

A) The transfers to Luster are fully taxable to both Gabriella and Juanita.
B) Juanita must recognize gain of $50,000.
C) Because Juanita is required to recognize gain on the transfer,Gabriella also must recognize gain.
D) Neither Gabriella nor Juanita will recognize gain on the transfer.
E) None of the above.