In Order to Induce Yellow Corporation to Build a New

question 62

Multiple Choice

In order to induce Yellow Corporation to build a new manufacturing facility in Knoxville, Tennessee, the city donates land (fair market value of $400,000) and cash of $100,000 to the corporation. Several months after the donation, Yellow Corporation spends $450,000 (which includes the $100,000 received from Knoxville) on the construction of a new plant located on the donated land.

• A) Yellow recognizes income of $100,000 as to the donation.
• B) Yellow has a zero basis in the land and a basis of $450,000 in the plant.
• C) Yellow recognizes income of $500,000 as to the donation.
• D) Yellow has a zero basis in the land and a basis of $350,000 in the plant.
• E) None of the above.

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Definitions:

Malpighian Tubes

The excretory system of certain arthropods, like insects and spiders, used for removing wastes and maintaining osmotic balance.

Liver

Abdominal organ that produces plasma proteins and bile, filters the blood, and stores glycogen.

Urine Concentration

The process by which the kidneys regulate the water content and solute composition of urine, affecting its overall concentration.

Distal Tubule

A portion of the kidney nephron that functions in the reabsorption of electrolytes and water, and the secretion of hydrogen and potassium ions.