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 incurs a loss for tax purposes. However, since she transferred the property to a corporation in exchange for stock that qualifies as Sec.1244 stock, she can treat the loss as an ordinary loss instead of a capital loss if she sells the stock. The loss amount would be the difference between the FMV of the property (which determines the basis of the stock received) and the selling price of the stock, which in this case is $40,000 - $30,000 = $10,000. Therefore, the best choice is B.

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