Cynthia is a successful sculptor who created a work that is now worth $400,000 and has no tax basis. Cynthia forms a corporation and contributes the sculpture to it in exchange for the corporation's shares. Fourteen months later, she sells all the stock for $400,000. She wants to treat the sale of the stock as a long-term capital gain. Evaluate the propriety of Cynthia's actions.
Cynthia is a successful sculptor who created a work that is now worth $400,000 and has no tax basis. Cynthia forms a corporation and contributes the sculpture to it in exchange for the corporation's shares. Fourteen months later, she sells all the stock for $400,000. She wants to treat the sale of the stock as a long-term capital gain. Evaluate the propriety of Cynthia's actions.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Cynthia is a successful sculptor who created a work that is now worth $400,000 and has
no tax basis. Cynthia forms a corporation and contributes the sculpture to it in exchange
for the corporation's shares. Fourteen months later, she sells all the stock for $400,000.
She wants to treat the sale of the stock as a long-term capital gain. Evaluate the propriety
of Cynthia's actions.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc9fb5bc3-9e95-45f7-97ea-d7c020b9b3e8%2F16f535ee-c600-492e-ae6b-fac3b90ce4bd%2Fx13yajw_processed.png&w=3840&q=75)
Transcribed Image Text:Cynthia is a successful sculptor who created a work that is now worth $400,000 and has
no tax basis. Cynthia forms a corporation and contributes the sculpture to it in exchange
for the corporation's shares. Fourteen months later, she sells all the stock for $400,000.
She wants to treat the sale of the stock as a long-term capital gain. Evaluate the propriety
of Cynthia's actions.
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