Art, an Unmarried Individual, Transfers Property (Basis of $130,000 and Fair

question 36

Multiple Choice

Art, an unmarried individual, transfers property (basis of $130,000 and fair market value of $120,000) to Condor Corporation in exchange for §1244 stock. The transfer qualifies as a nontaxable exchange under § 351. Because the property is loss property, Condor takes a basis in the property of $120,000. Five years later, Art sells the Condor stock for $50,000. With respect to the sale, Art has:

• A) An ordinary loss of $80,000.
• B) An ordinary loss of $70,000 and a capital loss of $10,000.
• C) A capital loss of $80,000.
• D) A capital loss of $30,000 and an ordinary loss of $50,000.
• E) None of the above.

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Definitions:

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for slight differentiation and some price control.

Product Differentiation

The method of differentiating a product or service from its competitors in the marketplace to increase its appeal to a specific target audience.

Monopolistic Competitor

A firm operating in a monopolistic competition market, offering a unique product but competing with several other firms in terms of price, quality, and branding.

Elastic Demand Curve

A representation of the demand for goods or services that are very sensitive to changes in price, indicating that a small change in price leads to a large change in quantity demanded.