Rufus owns 12 acres of land he purchased as an investment for $5,390. He spent an additional $34,570 subdividing the land into residential parcels and having utility lines run to the property. After the subdividing and utility lines had been completed, he gifted two acres of the land to his sister as a wedding present.
The cost of subdividing the land is added to the initial cost of the 12acres resulting in a basis of $42,000. The basis of the 2 acres gifted to his sister, $7,000 [($42,000 ÷ 12 = $3,500) x 2] reduces the adjustedbasis in the 10 remaining acres to $35,000.

Original cost $5,000
Additional costs for subdividing 37,000
subdividing37,000Basis before gift $42,000
Gift of two acres ($42,000 ÷ 12 = $3,500 x 2) (7,000)
Adjusted basis of ten acres $35,000

Which of the following statements is correct? a) due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of u.s. businesses (in terms of number of businesses) are organized as corporationsb) most businesses (by number and total dollar sales) are organized as proprietorships or corporation. however, if the business gets very large, it becomes advantageous to convert to a corporation, primarily because corporations have important tax advantages over proprietorships and partnerships.c) due to legal considerations related to ownership transfers and limited liability, which affect the ability to attract capital, most business (measured by dollar sales) is conducted by corporations in spite of large corporations' less favorable tax treatmentd) large corporations are taxed more favorably than proprietorshipse) corporate stockholders are exposed to unlimited liability

Post test question number 9 for entering the job market

Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self-interests. what does this best illustrate? a. diseconomies of scale b. principal-agent problem c. experience-curveeffects d. information asymmetries