A Corporation Owns Many Acres of Timber,which It Acquired Three

question 4

Multiple Choice

A corporation owns many acres of timber,which it acquired three years ago,and which has a $150,000 basis for depletion.The timber is cut during the current year for use in the corporation's business.The FMV of the timber on the first day of the current year is $280,000.If the corporation makes the appropriate election,the tax result is

• A)recognition of a Sec.1231 gain of $130,000.
• B)no recognition of gain or loss since the timber is used in the business.
• C)recognition of a gain at the time of sale if the timber is later sold with the gain equal to the sales price less the basis in the timber.
• D)recognition of a gain if the timber is later sold with the gain equal to the sales price less $280,000 (FMV on the first day of the year of the cutting).

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Definitions:

Crash Cost

The additional cost incurred to reduce the duration of a project activity or the entire project.

Normal Duration

The typical time it takes to complete an activity or task under normal circumstances, without any delays or accelerations.

Crash Cost

The additional cost associated with reducing the time (crashing) required to complete a project or a phase of a project beyond normal expectations.

Time Savings

The reduction in the amount of time required to complete a task or project, often leading to efficiency improvements.