Vanessa Contributed $20,000 of Cash and Land with a Fair

question 90

Multiple Choice

Vanessa contributed $20,000 of cash and land with a fair market value of $100,000 and an adjusted basis of $40,000 to Cook, Inc.(an S corporation) when it was formed.The land was encumbered by a $30,000 mortgage executed two years before.What is Vanessa's tax basis in her Cook, Inc., stock after formation?

• A)$20,000.
• B)$30,000.
• C)$60,000.
• D)$80,000.
• E)$120,000.

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Definitions:

Rate of Return

The profit or deficit experienced from an investment, represented as a percentage of the investment's starting price.

Multiple-class Shares

Stocks issued by a single company that have different rights, dividends, or voting powers, typically designated as Class A, Class B, etc.

Front-end Load

A commission or sales charge applied at the time of the initial purchase of an investment.

SEC Rule 12b-1

A regulation by the U.S. Securities and Exchange Commission that allows mutual funds to charge their shareholders for advertising and sales promotion expenses.