Last Year, Toby Made a Capital Contribution of a Pretzel

question 55

Multiple Choice

Last year, Toby made a capital contribution of a pretzel maker having a $2,000 adjusted basis and a $200 FMV to Keke Corporation in exchange for additional stock. This year, Keke Corporation adopted a plan of liquidation. Prior to the adoption of the liquidation plan, Keke had not used the pretzel maker in connection with the conduct of its trade or business. Which of the following statements is true?

• A)Keke Corporation may recognize a loss of $1,800.
• B)Keke Corporation may recognize a loss of $200.
• C)Keke Corporation's basis for determining the loss will be $2,000.
• D)Keke Corporation's basis for determining the loss will be $200.

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Definitions:

Remnants

Traces or remains of something that once existed.

Fire

A rapid oxidation process, which is a chemical reaction resulting in the release of heat and light.

Hominins

Refers to the group that includes modern humans, extinct human species, and all our immediate ancestors.

Browsers

Herbivorous animals that feed on leaves, soft shoots, or fruits of high-growing, woody plants rather than grasses.