Yenhung,who is single,forms a corporation using a tax-free asset transfer,which qualifies under Sec.351.She contributes property having an adjusted basis of $50,000 and an FMV of $40,000.The stock received from the corporation is Sec.1244 stock.When Yenhung sells the stock for $30,000,her loss is

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When Yenhung contributes property with a FMV lower than the adjusted basis, she will have a deemed loss of $10,000 ($50,000 - $40,000). However, since the stock received from the corporation is Sec.1244 stock, Yenhung can recognize an ordinary loss of up to $50,000 ($100,000 for married filing jointly taxpayers) on the sale of such stock. Therefore, when Yenhung sells the stock for $30,000, she can recognize an ordinary loss of $30,000, which will be the amount of the deemed loss due to the property contribution ($10,000) plus an additional $20,000 from the sale of the stock. Therefore, her total loss will be $30,000.

Yenhung,who Is Single,forms a Corporation Using a Tax-Free Asset Transfer,which