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:

Evolution

The process by which different kinds of living organisms are thought to have developed and diversified from earlier forms during the history of the earth.

Hindsight Bias

A tendency to exaggerate the certainty of what could have been anticipated ahead of time.

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An electoral process in which citizens vote to elect an individual to serve as the head of the government or the state.

Availability Heuristic

A strategy in which one estimates the frequency or probability of an event by the ease with which mental operations, such as retrieval of examples and construction of examples, can be carried out.