Abada Inc Has a $925,000 Basis in 100% of the Stock

question 63

True/False

Abada Inc. has a $925,000 basis in 100% of the stock of AbWest Inc., which derives all its income from a manufacturing activity. If Abada determines that the AbWest stock is worthless, it can recognize a $925,000 ordinary loss.

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Definitions:

Operating Expense

Refers to the costs associated with the day-to-day operations of a business, excluding costs related to production.

Receivables

Amounts due to be paid to a company by its customers for goods or services delivered on credit terms.

Bad Debt Expense

The expense recognized when a business determines that an amount owed by a debtor is unlikely to be collected.

Specific Customer's Account

An account representing the transactions and outstanding balance related to a particular customer.