Copper Corporation (E & P of $1

question 115

Multiple Choice

Copper Corporation (E & P of $1.2 million) distributes land (basis of $410,000, fair market value of $650,000) to Lauren, a shareholder, to carry out a qualifying stock redemption. Lauren had a basis of $90,000 in the shares redeemed. Which of the following is an incorrect statement regarding the redemption?

• A) If the land is distributed subject to a $500,000 liability, Copper Corporation will recognize a gain of $240,000.
• B) If the land is distributed subject to a $500,000 liability, Lauren will have a basis in the land of $650,000.
• C) If the land is distributed subject to a $500,000 liability, Lauren will recognize a gain of $60,000.
• D) If the land is distributed subject to a $700,000 liability, Copper Corporation will recognize a gain of $290,000.
• E) None of the above.

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Definitions:

Alarm-Calling

Vocal signals emitted by some animals to warn conspecifics of potential predators, enhancing group survival but potentially increasing risk to the caller.

Hamilton's Rule

A principle of kin selection that predicts when natural selection will favor altruistic acts among related individuals, based on the cost to the altruist, the benefit to the recipient, and the degree of relatedness.

Adaptive

Relating to or characterized by adaptation; capable of adjusting to new conditions for survival advantage.

Alarm-Calling

A behavior in animals where individuals produce vocalizations to warn conspecifics of potential danger.