Jack Has a Basis of $36,000 in His 1,000 Shares

question 47

Essay

Jack has a basis of $36,000 in his 1,000 shares of Acorn Corporation stock (a capital asset).The stock was acquired three years ago.He receives the following distributions as part of a plan of liquidation of Acorn Corporation:
$$\begin{array} { l l } \text { date } & \text { Amount } \\\text { March } 31 \text { of } 2009 & \$ 10,000 \\\text { July } 15 \text { of } 2009 & 10,000 \\\text { November } 15 \text { of } 2010 & 10,000 \\\text { january } 15 \text { of } 2010 & 10,000\end{array}$$ What are the amount and character of the gain or loss that Jack will recognize during 2009? During 2010?

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Definitions:

Price Lining

A pricing strategy where products or services are grouped into different price ranges to target various consumer segments.

Retail Goods

Products that are sold to the end consumer for personal or household use.

Price Skimming

A pricing strategy where a firm charges the highest initial price that customers will pay and lowers it over time as demand at the higher price is satisfied.

Maximizing Profits

The process or strategy of adjusting the operations, pricing, and production of a business to generate the highest possible profit margins.