Question: Nancy, who is single, formed a corporation during 2006 using a tax-free asset transfer that qualified under Sec. 351. She transferred property having an adjusted

Nancy, who is single, formed a corporation during 2006 using a tax-free asset transfer that qualified under Sec. 351.

She transferred property having an adjusted basis of $80,000 and a fair market value of $60,000, and in exchange received Sec. 1244 small business corporation stock. During February 2011, Nancy sold all of her stock for $35,000. What is the amount and character of Nancy’s recognized loss resulting from the sale of the stock in 2011?

a. $0 ordinary loss; $45,000 capital loss.

b. $25,000 ordinary loss; $10,000 capital loss.

c. $25,000 ordinary loss; $20,000 capital loss.

d. $45,000 ordinary loss; $0 capital loss.

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