Silver Corporation receives $1 million in cash from Madison County as an inducement to expand its operations. Within one year, Silver spends $1.5 million to enlarge its existing plant. Silver Corporation's basis in the expansion is $500,000.

Question

Quizplus · Accepted Answer

The $1 million received from Madison County is considered a capital contribution and is not included in Silver Corporation's basis in the expansion. Therefore, the basis is only $500,000, which is the amount spent on the expansion.

Silver Corporation Receives $1 Million in Cash from Madison County