Last Year, Toby Made a Capital Contribution of a Pretzel

question 55

Multiple Choice

Last year, Toby made a capital contribution of a pretzel maker having a $2,000 adjusted basis and a $200 FMV to Keke Corporation in exchange for additional stock. This year, Keke Corporation adopted a plan of liquidation. Prior to the adoption of the liquidation plan, Keke had not used the pretzel maker in connection with the conduct of its trade or business. Which of the following statements is true?

• A)Keke Corporation may recognize a loss of $1,800.
• B)Keke Corporation may recognize a loss of $200.
• C)Keke Corporation's basis for determining the loss will be $2,000.
• D)Keke Corporation's basis for determining the loss will be $200.

---

Definitions:

Price Change

A shift in the cost at which goods or services are sold, either increasing or decreasing in amount.

Price Elastic

The degree to which the quantity demanded of a product changes in response to a change in its price.

Capital

Capital refers to financial assets or the financial value of assets, such as funds held in deposit accounts, as well as the tangible machinery and production equipment used in environments such as factories and other manufacturing facilities.

Labor Substitutable

The concept that one form of labor can replace another in performing specific tasks or jobs, reflecting flexibility in the workforce.