Walter, Who Owns All of the Ajax Corporation Stock, Purchases

question 35

Multiple Choice

Walter, who owns all of the Ajax Corporation stock, purchases a truck from Ajax Corporation in January. The truck cost $12,000 and has a $10,000 adjusted basis. Walter pays the truck's $8,000 FMV. Later in the same year, Walter sells the truck to an unrelated party for $13,000. With respect to these transactions,

• A) Ajax Corporation reports no loss and Walter reports a gain of $5,000.
• B) Ajax Corporation reports a loss of $4,000 and Walter reports a gain of $5,000.
• C) Ajax Corporation reports a loss of $2,000 and Walter reports a gain of $5,000.
• D) Ajax Corporation reports no loss and Walter reports a gain of $3,000.