Patti Sells a Painting That Has a Fair Market Value

question 1

Multiple Choice

Patti sells a painting that has a fair market value of $9,000 to James for $6,000. Which of the following statements about the tax effect of the sale is/are correct?
I.If James is an employee of Patti's, no income is recognized from the sale.
II.If James is Patti's brother, James does not recognize any income from the sale.
III.If Patti is an art dealer and she sold the painting to James because she needed cash quickly, James does not recognize any income from the sale.
IV.If James owns 60% of Patti's company, James does not recognize any income from the sale.
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• A)Only statement II is correct.
• B)Only statement III is correct.
• C)Only statements II, and III are correct.
• D)Only statements II, III, and IV are correct.
• E)Statements I, II, III, and IV are correct.

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Definitions:

Atherosclerosis

A condition characterized by the buildup of fats, cholesterol, and other substances in and on the artery walls, which can restrict blood flow.

Inflammatory Heart Disease

A condition caused by inflammation of the heart muscles or tissues, which can lead to various health complications, including myo- and pericarditis.

Valvular Heart Disease

A condition characterized by damage to or a defect in one of the four heart valves, affecting the blood flow through the heart.

Hypertension

A medical condition characterized by persistently high blood pressure.