Eve transfers property (basis of $120,000 and fair market value of $400,000) to Green Corporation for 80% of its stock (worth $350,000) and a long-term note (worth $50,000) executed by Green Corporation and made payable to Eve. As a result of the transfer:
a. Eve recognizes no gain.
b. Eve recognizes a gain of $50,000.
c. Eve recognizes a gain of $230,000.
d. Eve recognizes a gain of $280,000.
e. None of these.

The correct answer is Option B.

Explanation:

The value of the property Eve transferred to Green Corporation would be assessed on the basis of market fair value under the head 'Income from House Property'. The market value of the property that Eve transferred to Green Corporation is $400,000. Meanwhile, Eve received 80% of Green Corporation stock that is worth $350,000. Gain on transfer is $400,000 - $350,000 = $50,000. Since Eve received some money from this transaction (a long-term note worth $50,000), that must be recognized as a gain since it is not included under Section 351.  

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