Rob and Fran Form Bluebird Corporation with the Following Investments

question 56

Multiple Choice

Rob and Fran form Bluebird Corporation with the following investments. Each receives 50% of Bluebird's stock.In addition, Fran receives cash of $40,000.One result of these transfers is that Fran has a:

• A)Recognized loss of $60,000.
• B)Recognized loss of $20,000.
• C)Basis of $460,000 in the Bluebird stock (assuming Bluebird reduces its basis in the land to $440,000).
• D)Basis of $400,000 in the Bluebird stock (assuming Bluebird reduces its basis in the land to $440,000).
• E)None of the above.

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Definitions:

Sherman Antitrust Act

A landmark federal statute in the United States passed in 1890 to prevent anti-competitive practices, monopoly, and to promote competition.

Federal Legislation

Laws passed by the federal government of a country, which apply to the entire nation and supersede local laws in areas of federal authority.

Restraint of Trade

A legal concept that seeks to enforce reasonable limitations on business practices to encourage competition and prevent monopolies.

Federal Trade Commission Act

A United States federal law established in 1914 to prevent unfair or deceptive business practices, including antitrust violations.