Rachel Owns 100% of the Stock of Cardinal Corporation

question 85

Multiple Choice

Rachel owns 100% of the stock of Cardinal Corporation. In the current year Rachel transfers an installment obligation, tax basis of $180,000 and fair market value of $350,000, for additional stock in Cardinal worth $350,000.

• A) Rachel has a taxable gain of $180,000.
• B) Rachel has a taxable gain of $170,000.
• C) Rachel recognizes no gain on the transfer.
• D) Rachel has a basis of $350,000 in the additional stock she received in Cardinal Corporation.
• E) None of the above.

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Definitions:

Cost-Effective Changes

Adjustments or improvements to processes, systems, or products that maximize benefits while minimizing costs.

Production

The process of creating goods or services through the combination of labor, materials, and technology.

Operation

The day-to-day activities necessary for an organization to function effectively and achieve its goals.

Raw Materials

The fundamental components or basic substances used in the production of goods or services.