A city contributes $500,000 to a corporation as an inducement to locate in the city. Within the next 12 months, the corporation uses the money to purchase property worth $500,000. The corporation has income of $500,000 and must reduce its tax basis in the property by the same amount.
Answer the following statement true (T) or false (F)
False
Rationale: The corporation has $500,000 of income, (i.e., it is not a tax-free capital contribution). The $500,000 purchase price of the property (its fair market value) is its basis. Thus, the statement is not entirely true.
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Answer the following statements true (T) or false (F)
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Answer the following statement true (T) or false (F)