Yenhung, Who Is Single, Forms a Corporation Using a Tax-Free $\begin{array}{|l|l|}\hline \text { Ordinary loss } & \text { Capital loss } \\\hline 0 & \$ 20,000 \\\hline\end{array}$

question 99

Multiple Choice

Yenhung, who is single, forms a corporation using a tax-free asset transfer, which qualifies under Sec. 351. She contributes property having an adjusted basis of $50,000 and an FMV of $40,000. The stock received from the corporation is Sec. 1244 stock. When Yenhung sells the stock for $30,000, her loss is

• A) \(\begin{array}{|l|l|}\hline
• \text { Ordinary loss } & \text { Capital loss } \\
• \hline 0 & \$ 20,000 \\
• \hline
• \end{array}\)
• B) \(\begin{array}{|l|l| }\hline
• \text { Ordinary loss } & \text { Capital loss } \\
• \hline \$ 10,000 & \$ 10,000\\\hline
• \end{array}\)
• C) \[\begin{array} { |l | l| }
• \hline \text { Ordinary loss } & \text { Capital loss } \\
• \hline \$ 20,000 & \$ 0 \\
• \hline
• \end{array}\]
• D) \[\begin{array} {| l | l |}
• \hline \text { Ordinary loss } & \text { Capital loss } \\
• \hline \$ 10,000 & \$ 0 \\
• \hline
• \end{array}\]

---

Definitions:

Ideal Market

A theoretical or perfect market condition where there are many buyers and sellers, no barriers to entry, and complete access to information.

Rent-Seeking

Actions by individuals and groups designed to restructure public policy in a manner that will either directly or indirectly redistribute more income to themselves or the projects they promote.

Monopoly Power

The ability of a single seller or company to control the market price and supply of a product or service.

High-priced Rental

Property rental arrangements that are significantly more expensive than the average market rate.