When Pheasant Corporation Was Formed Under § 351, Kristen Transferred

question 63

Multiple Choice

When Pheasant Corporation was formed under § 351, Kristen transferred property (basis of $26,000 and fair market value of $22,500) for § 1244 stock. Kristen's basis in the Pheasant stock is $26,000. Three years later, Pheasant Corporation goes bankrupt and its stock becomes worthless. Kristen, who is single, owned the stock as an investment. Kristen's loss is:

• A) $26,000 capital.
• B) $22,500 ordinary and $3,500 capital.
• C) $3,500 ordinary and $22,500 capital.
• D) $26,000 ordinary.
• E) None of the above.

---

Definitions:

Federal Funds

Central bank reserves loaned by one bank to another, typically overnight, to meet reserve requirements.

Central Hudson

A legal test used by United States courts to determine the constitutionality of restrictions on commercial speech.

Commercial Speech

Speech or communication (including advertising) made by businesses that is protected under the First Amendment but can be regulated by the government.

Public Service Commission

A governmental body responsible for regulating the rates and services of public utilities.