5. | Question : | (TCO 1) Tim, a cash-basis taxpayer, incorporates his sole proprietorship. He transfers the following items to the newly created Wren Corporation. | Adjusted | Fair Market | | Basis | Value | Cash | $ 20,000 | $ 20,000 | Building | 110,000 | 160,000 | Mortgage payable (secured by the building and held for 15 years) | 135,000 | 135,000 |
With respect to this transaction, |