Kristine Owns All of the Stock of a C Corporation

question 13

Multiple Choice

Kristine owns all of the stock of a C corporation which owns the following assets: $\begin{array}{lrr}&\text { Adjusted Basis }&\text { Fair Market Value }\\\text { Accounts receivable } & \$-0- & \$ 60,000 \\\text { Inventory } & 20,000 & 30,000 \\\text { Machinery and equipment* } & 50,000 & 90,000 \\\text { Buil dings** } & 120,000 & 170,000 \\\text { Land } & 80,000 & 140,000 \\& \$ \mathbf{2 7 0 , 0 0 0} & \$ 490,000\end{array}$ * Potential § 1245 recapture of $45,000. ** Straight-line depreciation was used.
Her adjusted basis for her stock is $270,000. Calculate Kristine's recognized gain or loss and classify it as capital or ordinary if she sells her stock for $500,000.

• A)$230,000 ordinary income.
• B)$230,000 capital gain.
• C)$115,000 ordinary income and $115,000 capital gain.
• D)$110,000 ordinary income and $120,000 capital gain.
• E)None of the above.

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Definitions:

Allostasis

The process by which the body responds to stressors and seeks to return to homeostasis, or stability, through physiological and behavioral changes.

Low Blood Pressure

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Division Of Labor

The allocation of different tasks to different people or groups, typically to improve efficiency and productivity in a workplace or society.

Professional Specialties

Distinct areas within a profession that focus on specific expertise, knowledge, and skills tailored to particular aspects of the profession, often recognized by professional societies or accreditation bodies.