Art, an Unmarried Individual, Transfers Property (Basis of $130,000 and Fair

question 36

Multiple Choice

Art, an unmarried individual, transfers property (basis of $130,000 and fair market value of $120,000) to Condor Corporation in exchange for §1244 stock. The transfer qualifies as a nontaxable exchange under § 351. Because the property is loss property, Condor takes a basis in the property of $120,000. Five years later, Art sells the Condor stock for $50,000. With respect to the sale, Art has:

• A) An ordinary loss of $80,000.
• B) An ordinary loss of $70,000 and a capital loss of $10,000.
• C) A capital loss of $80,000.
• D) A capital loss of $30,000 and an ordinary loss of $50,000.
• E) None of the above.

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Definitions:

Administration

in a legal context, refers to the management and settlement of an estate or business affairs, especially in cases of bankruptcy or probate.

State Law Claims

legal actions based on violations of state statutes or common law, as opposed to federal laws.

Creditors' Meeting

A gathering organized during the bankruptcy process where creditors can question the debtor about their finances and the proposed plans for reorganizing or settling debts.

Bankruptcy

A legal status for individuals or entities that cannot repay the debts they owe, allowing them to seek relief through court intervention.