In Order to Induce Yellow Corporation to Build a New

question 62

Multiple Choice

In order to induce Yellow Corporation to build a new manufacturing facility in Knoxville, Tennessee, the city donates land (fair market value of $400,000) and cash of $100,000 to the corporation. Several months after the donation, Yellow Corporation spends $450,000 (which includes the $100,000 received from Knoxville) on the construction of a new plant located on the donated land.

• A) Yellow recognizes income of $100,000 as to the donation.
• B) Yellow has a zero basis in the land and a basis of $450,000 in the plant.
• C) Yellow recognizes income of $500,000 as to the donation.
• D) Yellow has a zero basis in the land and a basis of $350,000 in the plant.
• E) None of the above.

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Definitions:

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with the unconditioned stimulus, eventually comes to trigger a conditioned response on its own.

Conditioned Response

A learned response to a previously neutral stimulus that has been repeatedly presented along with an unconditioned stimulus.

Unconditioned Stimulus

A stimulus that automatically triggers a response without any need for prior learning.

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with an unconditioned stimulus, eventually triggers a conditioned response.