Mr Big, a Nonshareholder, Who Is Not a Customer, Potential

Mr. Big, a nonshareholder, who is not a customer, potential customer, governmental entity, or civic group, contributes $60,000 cash and land worth $100,000 to induce Carrie Corporation to relocate to his municipality. Carrie Corporation spent $50,000 of the cash within the first 12 months of his contribution to purchase machinery. The contribution results in

A) Carrie Corporation recognizes no income as a result of the contribution, the land and machinery have a basis of zero.
B) Carrie Corporation recognizes no income as a result of the contribution, the land has a basis of zero, and the machinery has a basis of $50,000.
C) Carrie Corporation recognizes no income as a result of the contribution, the land has a basis of $100,000, and the machinery has a basis of $60,000.
D) Carrie Corporation recognizes $160,000 of income.

Correct Answer:

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