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Evelyn incorporates her sole proprietorship, transferring it to newly formed Papaya Corporation. The assets transferred...

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Accounting

Evelyn incorporates her sole proprietorship, transferring it to newly formed Papaya Corporation. The assets transferred have an adjusted basis of $400,000 and a fair market value of $500,000. Also transferred was $50,000 in liabilities, $1,000 of which was personal and the balance of $49,000 being business related. In return for these transfers, Evelyn receives all of the stock in Papaya Corporation. Which is correct

A. Evelyn recognizes no gain or income

B. Evelyn recognizes gain of $1,000

C. Evelyn recognizes gain of $49,000

D. Evelyn recognizes gain of $50,000

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