Chris Transfers Land with a Basis of $40,000 to Webb

question 84

Multiple Choice

Chris transfers land with a basis of $40,000 to Webb Corporation in exchange for 100% of Webb's stock. At the date of the transfer, the land had a $30,000 fair market value. Absent an election by Chris, Webb's basis in the land is

• A)$30,000.
• B)$35,000.
• C)$40,000.
• D)none of the above

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Definitions:

Human Capital

The combined abilities, expertise, and non-physical assets of people that can generate economic benefits for the individuals, their employers, or the society.

Technological Progress

The improvement or development in technology which increases productivity and can lead to economic growth and improved living standards.

Backward-Bending

This term describes a situation where, beyond a certain point, higher wages actually lead to a decrease in labor supply because workers prefer leisure over additional work.

Substitution Effect

The economic principle that as the price of one good increases, consumers will replace it with a similar, less expensive good, influencing demand patterns.