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) \[\begin{array} {| l | l |}
• \hline \text { Ordinary loss } & \text { Capital loss } \\
• \hline \$ 10,000 & \$ 0 \\
• \hline
• \end{array}\]

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Definitions:

Accounting Equation

The fundamental equation of double-entry bookkeeping, stating that assets equal liabilities plus equity (Assets = Liabilities + Equity).

Services Provided

Work performed by one party for another without the supply of tangible goods. Examples include consulting, marketing, maintenance, and legal services.

Accounting Equation

The accounting equation is a fundamental principle of accounting representing the relationship between assets, liabilities, and owner's equity (Assets = Liabilities + Owner's Equity).

Received Cash

Funds that are taken in by the company, often from transactions such as sales, loans, or investments.