On May 18, of Last Year, Carter Sells Unlisted Stock

question 1021

Multiple Choice

On May 18, of last year, Carter sells unlisted stock with a cost of $24,000 for $60,000. Carter collects $20,000 initially and is scheduled to receive $10,000 each year for four years starting this year plus an acceptable rate of interest. After receiving the first $10,000 scheduled installment payment, Carter is unable to collect any further payments. After incurring legal fees of $1,000, Carter recovers a portion of the stock valued at $26,000. As a result of the repossession, Carter must report

• A) capital gain of $13,000.
• B) capital gain of $9,000.
• C) ordinary income of $13,000.
• D) ordinary income of $9,000.

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