Amos contributes land with an adjusted basis of $150,000 and a fair market value of $200,000 to White, Inc, an S corporation, in exchange for 50% of the stock of White, Inc Carol contributes cash of $200,000 for the other 50% of the stock. If White later sells the land for $225,000, $62,500 [$50,000 + 50%($25,000)] is allocated to Amos and $12,500 ($25,000 × 50%) is allocated to Carol
a. True
b. False
Indicate whether the statement is true or false
False
RATIONALE: Special allocations apply to partnerships and not to S corporations. The $75,000 recognized gain is allocated based on stock ownership; that is, $37,500 to Amos and $37,500 to Carol.
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