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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B) The loss on formation of the corporation ($10,000) is postponed until the stock is sold and retains its character as capital. $10,000 of the loss ($30,000 sales proceeds - $40,000 Sec. 1244 basis) qualifies as an ordinary loss on the sale of Sec. 1244 stock.

Yenhung, Who Is Single, Forms a Corporation Using a Tax-Free