Question

.which of the following statement (a-e is true)

In order to induce Begonia Corporation to build a new manufacturing facility in Bangor,

are, the city donates land (far market value of $150,000) and cash of $50,000 to the

corporation. Within several months of the donation, Begonia Corporation spends

$250,000 (which includes the $50,000 received from Oxford) on the construction of a

plant located on the donated land.

A Begonia must recognize income of $50,000 as to the donation.

B Begonia will have a zero basis in the land and a basis of $250,000 in the plant.

C. Begonia must recognize income of $200,000 as to the donation.

d. Begonia will have a zero basis in the land and a basis of $200,000 in the plant.

e. None of the above.

Answer 1

Statement C is True. Begonia Must recognize income of $2,00,000 as to the donation

Since the to total cost of construction was $4,00,000 and $2,00,000 was expended by the corporation and balance fund should be treated as an income from donation .

Statement A is False because the corporation also gets land which valued $1,50,000

Statement B is False because the when the land is donated then the corporation has the basis on that property and the corporation only expended $2,00,000 from their own hand

Statement D is false because the when the land is donated then the corporation has the basis on that property