Ed Owns a Racehorse with a $600,000 Basis Used for Breeding

question 35

Multiple Choice

Ed owns a racehorse with a $600,000 basis used for breeding purposes.The racehorse is killed in a tornado,and Ed collects $1,000,000 from the insurance company.He purchases another horse for $550,000.What is the amount of gain recognized on the transaction?

• A)$0
• B)$50,000
• C)$350,000
• D)$400,000

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Definitions:

Codec

A device or program that compresses data to enable faster transmission and decompresses received data.

MPEG-4

A method of defining compression of audio and visual (AV) digital data, introduced to provide improved multimedia capabilities.

Ripping

The process of extracting data or media from one format, such as a CD or DVD, to a hard drive, often in a different format.

Digital-to-analog Converter

An electronic device that converts digital signals into analog signals, often used in music players and video systems.