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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Definitions:

Moral Standards

Moral Standards are principles of right and wrong behavior and the goodness or badness of human character.

Social Norms

Shared guidelines or rules that prescribe the behavior that is acceptable within a group or society.

Psychology

The science that studies behavior and mental processes.

Behavior

Actions or reactions of an organism, often in response to external stimuli, observed and measurable.