Rob, Bill, and Steve Form Big Company

Rob, Bill, and Steve form Big Company. Rob performs $45,000 of services for his shares of the company. Bill transferred property with a basis of $5,000 for $75,000 of stock. Steve contributes cash of $100,000 for his shares. Which of the three must recognize income in the year of the formation?

A) Rob
B) Rob, Bill
C) Bill
D) Steve, Bill
E) Steve, Rob

Correct Answer:

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