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:

Lotus

A plant associated with purity and beauty in various cultures, often found in water gardens and depicted in art and literature, symbolizing elegance and rebirth.

Papyrus

A plant native to Egypt and adjacent lands used to make paperlike writing material; also, the material or any writing on it.

Human Figure

The representation of the human body in art, which can range from realistic to abstract interpretations.

New Kingdom

An era of ancient Egyptian history, characterized by its wealth, power, and the construction of many of the most famous monuments of Egypt, including the temples at Karnak and the Valley of the Kings.