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

question 23

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 and Art's basis in the Condor stock is $130,000.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:

Fair Market Value

The price at which an asset would sell in the market under conditions where buyers and sellers are acting freely, informed, and without undue pressure.

Book Value

The net value of a company's assets as listed on the balance sheet, calculated as total assets minus intangible assets (like goodwill) and liabilities.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.

Salvage Value

The estimated residual value of an asset at the end of its useful life, reflecting what the asset can be sold for or its scrap value.