Allen Transfers Marketable Securities with an Adjusted Basis of $120,000

question 81

True/False

Allen transfers marketable securities with an adjusted basis of $120,000, fair market value of $300,000, for 85% of the stock of Heron Corporation. In addition, he receives cash of $40,000. Allen recognizes a capital gain of $40,000 on the transfer.

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Definitions:

Magical Thinking

The belief that one's thoughts, words, or actions can achieve specific effects in the real world in ways that defy the conventional laws of cause and effect.

Primacy Effect

The tendency to remember information at the beginning of a list better than the information in the middle or the end.

Recency Effect

The tendency to remember and place more importance on the most recently presented information or experiences.

High Distinctiveness

A feature or attribute that makes an individual or object stand out significantly from others in the same category or context.