All of the Following Transactions Are Exempt from Rules Regarding

question 76

Multiple Choice

All of the following transactions are exempt from rules regarding imputed interest with the exception of

• A)taxpayer purchases newly issued bond for $700 (face value of $1,000).
• B)taxpayer sells land for $135,000 with payment due in 5 years and no stated interest.
• C)taxpayer sells his home gym equipment for $2,800 with payment due in one year and no stated interest.
• D)taxpayer purchases a sailboat costing $2,500 for weekend boating trips; the full price payable in five months and no stated interest.

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Definitions:

Transaction

An exchange or transfer of goods, services, or funds between parties.

Unsecured Creditor

A creditor who has extended credit without obtaining any collateral, making them more vulnerable in the event of debtor default.

Secured Creditor

A creditor that may look to particular assets of the debtor to ensure payment of the debt.

Chattel Mortgage

A chattel mortgage is a loan agreement where personal movable property is used as collateral for the loan, and the borrower retains possession while the lender has a security interest.