On September 1, of the Current Year, James, a Cash-Basis

question 81

Multiple Choice

On September 1, of the current year, James, a cash-basis taxpayer, sells his farm to Bill, also a cash-basis taxpayer, for $100,000. James' basis in the farm is $65,000. The real property tax year is the calendar year. Real estate taxes on the property for the year are $3,650 and are payable in November of the current year. The sales agreement does not provide for apportionment of real estate taxes between the buyer and seller. Assume Bill pays all of the real estate taxes in the current year. The effects of this sales structure will be:

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Definitions:

Depreciation Expense

The allocated cost of an asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Comparative Balance Sheet

A financial statement displaying the balance of assets, liabilities, and equity for two or more time periods side by side, facilitating trend analysis and financial comparison over time.

Financing Activities

Activities that result in changes in the size and composition of the equity capital or borrowings of the entity, as reported in the cash flow statement.

Fiscal Year

A twelve-month period used for accounting purposes and financial reporting by an organization, which may not align with the calendar year.