During the Current Year, Ecru Corporation Is Liquidated and Distributes

question 67

Multiple Choice

During the current year, Ecru Corporation is liquidated and distributes its only asset, land, to Kena, the sole shareholder. On the date of distribution, the land has a basis of $250,000, a fair market value of $650,000, and is subject to a liability of $500,000. Kena, who takes the land subject to the liability, has a basis of $120,000 in the Ecru stock. With respect to the distribution of the land, which of the following statements is correct?

• A) Kena recognizes a gain of $530,000.
• B) Ecru Corporation recognizes a gain of $250,000.
• C) Kena recognizes a gain of $30,000.
• D) Kena has a basis of $250,000 in the land.
• E) None of these.

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Definitions:

Evaluative Criteria

Consist of a set of salient, or important, attributes about a particular product.

Evoked Sets

Refer to a group of brands or products a consumer considers during the decision-making process before making a purchase.

Evoked Set

A group of relevant brands or products that a consumer remembers when making a purchase decision.

Locus of Control

A psychological concept referring to the degree to which individuals believe they have control over the events in their lives.