Amos Contributes Land with an Adjusted Basis of $150,000 and a Fair

question 43

True/False

Amos contributes land with an adjusted basis of $150,000 and a fair market value of $200,000 to White, Inc., an S corporation, in exchange for 50% of the stock of White, Inc. Carol contributes cash of $200,000 for the other 50% of the stock. If White later sells the land for $225,000, $62,500 [$50,000 + 50%($25,000)] is allocated to Amos and $12,500 ($25,000 × 50%) is allocated to Carol.

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Definitions:

Consumer Surplus

The contrast between the full amount consumers are willing to disburse for a product or service and the actual disbursement.

Price Floor

A government-imposed minimum price that can be charged for a good or service, intended to prevent prices from dropping too low.

Consumer Surplus

The differentiation between what consumers are prepared to expend on a good or service and the sums they actually do.

Supply Curve

An illustrated chart that demonstrates how the supply quantity relates to a good's price.