When Pheasant Corporation Was Formed Under § 351, Kristen Transferred

question 63

Multiple Choice

When Pheasant Corporation was formed under § 351, Kristen transferred property (basis of $26,000 and fair market value of $22,500) for § 1244 stock. Kristen's basis in the Pheasant stock is $26,000. Three years later, Pheasant Corporation goes bankrupt and its stock becomes worthless. Kristen, who is single, owned the stock as an investment. Kristen's loss is:

• A) $26,000 capital.
• B) $22,500 ordinary and $3,500 capital.
• C) $3,500 ordinary and $22,500 capital.
• D) $26,000 ordinary.
• E) None of the above.

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Definitions:

Indirect Materials

Materials used in the production process that are not directly traceable to the final product, such as lubricants and cleaning supplies used in machinery.

Used

Previously owned or utilized by someone before its current owner or application.

Sales Supplies

Items and materials used in the process of selling goods or services.

Used

Items that have been previously owned or utilized by someone before being sold or transferred.