A Corporation Owns Many Acres of Timber,which It Acquired Three

question 4

Multiple Choice

A corporation owns many acres of timber,which it acquired three years ago,and which has a $150,000 basis for depletion.The timber is cut during the current year for use in the corporation's business.The FMV of the timber on the first day of the current year is $280,000.If the corporation makes the appropriate election,the tax result is

• A)recognition of a Sec.1231 gain of $130,000.
• B)no recognition of gain or loss since the timber is used in the business.
• C)recognition of a gain at the time of sale if the timber is later sold with the gain equal to the sales price less the basis in the timber.
• D)recognition of a gain if the timber is later sold with the gain equal to the sales price less $280,000 (FMV on the first day of the year of the cutting).

---

Definitions:

Exchange Rate

the price at which one currency can be exchanged for another, influencing international trade and investment.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Demand

The desire and ability of consumers to purchase goods or services at given prices.

Supply

The total amount of a product or service that is available for purchase at any given price.