Jalen Transferred His 10 Percent Interest to Wolverine Company as Part

question 55

Multiple Choice

Jalen transferred his 10 percent interest to Wolverine Company as part of a completeliquidation of the company. In the exchange, he received land with a fair market value of$100,000. Jalen's basis in the Wolverine stock was $50,000. The land had a basis to Wolverine Company of $80,000. What amount of gain does Jalen recognize in the exchange and what is his basis in the land he receives?

• A) No gain recognized and a basis in the land of $50,000.
• B) No gain recognized and a basis in the land of $80,000.
• C) $50,000 gain recognized and a basis in the land of $100,000.
• D) $50,000 gain recognized and a basis in the land of $80,000.

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Definitions:

Promisor

The party in a contract who makes a promise to perform an obligation to the promisee.

Noncompete Provision

A clause in a contract that prohibits an individual from entering into or starting a similar profession or trade in competition against another party, usually the employer, for a certain period of time.

Pharmacy

A facility or establishment where prescription drugs are prepared and dispensed by licensed professionals, as well as where various healthcare advice may be provided.

Covenants

Legally enforceable promises contained in a contract or agreement.