Martin Operates a Law Practice as a Sole Proprietorship Using

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. $$\begin{array} { | l | c | c | } \hline & \text { Adjusted Basis } & \text { FMV } \\\hline \text { Cash } & \$ 10,000 & \$ 10,000 \\\text { Equipment } & 80,000 & 100,000 \\\text { Accounts receivable } & 0 & 120,000 \\\text { Accounts payable (deductible expenses) } & 0 & 60,000 \\\text { Note payable (on equipment) } & 50,000 & 50,000 \\\hline\end{array}$$ Martin must recognize a gain of and has a stock basis of :

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

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