Silvia Transfers to Leaf Corporation a Machine She Had Purchased

question 64

Multiple Choice

Silvia transfers to Leaf Corporation a machine she had purchased a year ago for $50,000.The machine has a $40,000 adjusted basis and an $55,000 FMV on the transfer date.$10,000 in depreciation was claimed by Silvia prior to the transfer.Silvia receives all 1,000 shares of Leaf Corporation stock worth $50,000 and a two-year note with a $5,000 FMV.What is the amount and character of the recognized gain or loss?

• A)$15,000 ordinary income
• B)$15,000 capital gain
• C)$5,000 ordinary income
• D)$5,000 capital gain

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Definitions:

Polyandry

A form of marriage in which a woman is married to two or more men at the same time.

Polygyny

A type of matrimonial arrangement where a man can concurrently have multiple wives.

Polygamy

A marital practice in which an individual has more than one spouse simultaneously, recognized in some cultures and religions.

Breadwinners

Persons who earn the primary source of income for a household, supporting the family's financial needs.