In Order to Induce Parakeet Corporation to Build a New

question 93

Multiple Choice

In order to induce Parakeet Corporation to build a new manufacturing facility in Oxford,Mississippi,the city donates land (fair market value of $250,000) and cash of $50,000 to the corporation.Within several months of the donation,Parakeet Corporation spends $350,000 (which includes the $50,000 received from Oxford) on the construction of a new plant located on the donated land.

• A)Parakeet recognizes income of $50,000 as to the donation.
• B)Parakeet has a zero basis in the land and a basis of $350,000 in the plant.
• C)Parakeet recognizes income of $300,000 as to the donation.
• D)Parakeet has a zero basis in the land and a basis of $300,000 in the plant.
• E)None of the above.