Identify Which of the Following Statements Is True

question 27

Multiple Choice

Identify which of the following statements is true.

• A) An accrual method of accounting taxpayer recognizes his/her realized gain on a corporate liquidation when there has been actual or constructive receipt of the liquidating distribution(s).
• B) The method of accounting used by shareholders involved in a complete liquidation is relevant when determining the year in which the shareholder's gain or loss should be reported.
• C) If a shareholder assumes or acquires liabilities of the liquidating corporation, the amount of these liabilities does not reduce the amount realized by the shareholder.
• D) All of the above are false.

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Definitions:

Profit Margin

A financial metric indicating the percentage of revenue that exceeds the cost of goods sold, serving as a measure of a company's profitability.

Total Asset Turnover

A metric assessing how effectively a company utilizes its assets to produce income.

Return on Total Assets

A financial ratio that measures a company's ability to generate earnings from its total assets.

Bonds

Fixed income investments representing a loan made by an investor to a borrower, typically corporate or governmental, that pays back with interest.