Nigel and Frank Form NFS, Inc

question 80

Multiple Choice

Nigel and Frank form NFS, Inc. an electing S corporation, by combining the assets of their respective businesses. Nigel contributes $10,000 and assets worth $90,000 (adjusted basis of $60,000) for a 1/3 interest. Frank contributes $90,000 and assets worth $270,000 (adjusted basis of $150,000) for a 2/3 interest. NFS also assumes $60,000 of debt on Frank's assets. What is Frank's basis in his stock?

• A)$180,000
• B)$220,000
• C)$240,000
• D)$300,000
• E)$360,000

---

Definitions:

Psychological Reactance Theory

A theory which proposes that people value thinking and acting freely. Therefore, situations that threaten their freedom arouse discomfort and prompt efforts to restore freedom.

Regulatory Focus Theory

The theory proposing that individuals regulate their behavior via two distinct systems: promotion focus (pursuit of goals and aspirations) and prevention focus (avoidance of negative outcomes).

Elaboration Likelihood Model

A theory in social psychology that explains the different ways people process persuasive messages, either through careful thought and evaluation or more automatic responses.

Promotion Focus

A general tendency to think and act in ways oriented toward the approach of positive outcomes.