Ezinne Transfers Land with an Adjusted Basis of $50,000 and a FMV

question 12

Multiple Choice

Ezinne transfers land with an adjusted basis of $50,000 and a FMV of $95,000 to a new business in exchange for a 50% ownership interest.The land is subject to a $60,000 mortgage which the business will assume.The business has no other liabilities outstanding.Indicate the amount of gain recognized by Ezinne due to this exchange if the building is transferred to (1) a corporation and (2) a partnership.Assume Sec.351 is satisfied in the case of the corporation and Sec.721 is satisfied in the case of the partnership.

• A) \[\begin{array} { | l | l | }
• \hline \text { Corporation } & \text { Partnership } \\
• \hline \$ 0 & \$ 0 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | l | }
• \hline \text { Corporation } & \text { Partnership } \\
• \hline \$ 10,000 & \$ 0 \\
• \hline
• \end{array}\]
• C) \[\begin{array} {| l | l | }
• \hline \text { Corporation } & \text { Partnership } \\
• \hline \$ 10,000 & \$ 10,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | l | }
• \hline \text { Corporation } & \text { Partnership } \\
• \hline \$ 0 & \$ 10,000 \\
• \hline
• \end{array}\]

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Definitions:

Practical Capacity

The maximum amount of work or output that can be realistically achieved in a specific period under normal operating conditions.

Cost Allocation

The process of assigning indirect costs to different departments, products, or projects based on relevant distribution bases.

Cost Pool

A grouping of individual costs, typically by department or service center, from which cost allocations are made.

Cost Objects

Any item for which costs are separately measured and tracked, including products, services, projects, or activities.