Emilio Owns Vacant Land He Is Holding for Investment

question 86

Multiple Choice

Emilio owns vacant land he is holding for investment. Two years ago he granted an option to purchase the land. The option grantee paid $25,000 for the option. This year the option expired unexercised. As a result, Emilio has:

• A) $25,000 long-term capital gain.
• B) $25,000 short-term capital gain.
• C) $25,000 ordinary gain.
• D) No recognized gain or loss.
• E) None of the above.

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Definitions:

Adverse Selection

A situation where sellers have information that buyers do not, or vice versa, affecting transactions in a way that is disadvantageous to one party.

Cafeteria Plan

An employee benefit plan that allows workers to choose from a variety of pre-tax benefits, including health insurance, retirement plans, and cash.

Family Dental Coverage

A type of health insurance plan designed specifically to cover dental expenses for an individual and their family members.

Negative Externalities

Costs suffered by a third party due to the economic activities of others, not accounted for in the market price.