Purple Corporation Has Two Equal Shareholders, Joshua and Ellie, Who

question 38

Multiple Choice

Purple Corporation has two equal shareholders, Joshua and Ellie, who are father and daughter.One year ago, the two shareholders transferred properties to Purple in a § 351 exchange.Joshua transferred land (basis of $400,000, fair market value of $350,000) and securities (basis of $20,000, fair market value of $80,000) , while Ellie transferred equipment (basis of $220,000, fair market value of $430,000) .In the current year, Purple Corporation adopts a plan of liquidation, sells all of its assets, and distributes the proceeds pro rata to Joshua and Ellie.The only loss realized upon disposition of the properties was with respect to the undeveloped land that had decreased in value to $290,000 and was sold for this amount.Purple never used the land for any business purpose during the time it was owned by the corporation.What amount of loss can Purple Corporation recognize on the sale of the land?

• A)$0.
• B)$50,000.
• C)$60,000.
• D)$110,000.
• E)None of the above.

---

Definitions:

Monetary Policy Lags

The delay between the implementation of monetary policy decisions and their effects on the economy, often complicating central bank efforts to control inflation and stimulate economic growth.

Fiscal Policy

Government policies related to taxation and spending that are intended to influence economic conditions.

Policy Makers

Individuals or groups responsible for making decisions and setting policies in governmental or corporate sectors.

Phillips Curve

A curve showing possible combinations of the inflation rate and the unemployment rate.