Joyce Passed Away on January 3 While on an Extended

question 31

Multiple Choice

Joyce passed away on January 3 while on an extended holiday cruise celebrating a very successful, and most profitable, previous year. Joyce was the chief executive officer of the Quillip Corporation. After the independent audit of Quillip's last year's financial statements was completed in February of this year, Joyce's estate received a $1,000,000 bonus check resulting from last year's corporate profits. Joyce's estate also sold Quillip stock for $500,000 in February of this year. Joyce originally purchased this stock eight years ago for $10,000. The stock was valued at $495,000 on her date of death. Solely based on the above facts, how much income in respect of a decedent should Joyce's estate report in the current year?

• A) $5,000
• B) $485,000
• C) $1,485,000
• D) $1,000,000

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Definitions:

Investment Account

An account held at a financial institution that is used to buy and sell securities, such as stocks, bonds, mutual funds, and ETFs.

Net Income

The final profit amount for a company once revenues are reduced by expenses and taxes.

Significant Influence

The power to participate in the financial and operating policy decisions of an investee, but not control them, usually indicated by owning 20% to 50% of the voting stock.

Consolidated Financial Statements

Financial statements that combine and present a parent company's and its subsidiaries' financials as if they were a single entity, consolidating their assets, liabilities, income, and expenses.