Nixon Inc Transferred Asset a to an Unrelated Party in Exchange

question 61

Multiple Choice

Nixon Inc. transferred Asset A to an unrelated party in exchange for Asset Z and $15,750 cash. Nixon's tax basis in Asset A was $400,000, and Asset Z had a $510,000 appraised FMV. Which of the following statements is true?

• A) If Asset A and Asset Z are like-kind property, Nixon recognizes a $15,750 gain and takes a $400,000 basis in Asset Z.
• B) If Asset A and Asset Z are not like-kind property, Nixon recognizes a $110,000 gain and takes a $510,000 basis in Asset Z.
• C) If Asset A and Asset Z are like-kind property, Nixon recognizes a $15,750 gain and takes a $415,750 basis in Asset Z.If Asset A and Asset Z are like-kind property, Nixon recognizes no gain and takes a $400,000 basis in Asset Z.
• D) If Asset A and Asset Z are like-kind property, Nixon recognizes a $15,750 gain and takes a $415,750 basis in Asset Z.

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Definitions:

Multiplier

In economics, a factor by which a change in spending results in an amplified change in national income and output.

Inflationary Gap

The difference between the actual output of an economy and the output it would produce without inflation, indicating an overheated economy.

Recessionary Gap

A situation where the real GDP is lower than the potential GDP at full employment, indicating underutilized resources.

Inflationary Gap

A scenario where aggregate demand exceeds aggregate supply at the level of full employment, leading to an increase in general price levels.