Lake City Corporation Owns All of the Stock in Columbia

question 10

Multiple Choice

Lake City Corporation owns all of the stock in Columbia Corporation. Pursuant to a plan of complete liquidation, Columbia distributes land having a $500,000 FMV and a $200,000 basis to Lake City. Lake City's basis in the land will be

• A)0)
• B)$200,000.
• C)$500,000.
• D)cannot be determined from the facts presented

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Definitions:

Separate Legal Entity

An entity, such as a corporation or limited liability company, recognized by law as having rights and obligations distinct from those of its members or owners.

Cumulative Feature

A characteristic of certain financial instruments or policies that allows for the accumulation of unpaid amounts or benefits over time.

Preferred Stockholders

Investors who own preferred shares in a company, which typically provide dividends before common stock and have priority over common shareholders in asset liquidation.

Par Value

The nominal or face value of a bond, share of stock, or other financial instrument, representing the value at which it is issued.