Ralph Transfers Property with an Adjusted Basis of $65,000 and an FMV

question 29

Multiple Choice

Ralph transfers property with an adjusted basis of $65,000 and an FMV of $70,000 to Lake Corporation in a Sec. 351 transaction. Ralph receives stock worth $60,000 and a short-term note having a $10,000 FMV. Ralph's basis in the stock is

• A)$75,000.
• B)$70,000.
• C)$65,000.
• D)$60,000.

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Definitions:

Income-Sharing Ratio

The predetermined agreement on how profits or losses will be distributed among partners or stakeholders in a business arrangement.

Capital Deficiency

A financial state where a company's liabilities exceed its assets, indicating financial distress.

Distribution of Cash

The allocation or disbursement of cash funds by a business to its stakeholders or for operational purposes.

Income Ratio

A metric that compares various components of income, such as net income to revenue, to assess a company's financial health.