Arthur Owns a Tract of Undeveloped Land (Adjusted Basis of $145,000)

question 85

Multiple Choice

Arthur owns a tract of undeveloped land (adjusted basis of $145,000) which he sells to his son, Ned, for its fair market value of $105,000. What is Arthur's recognized gain or loss and Ned's basis in the land?

• A) $0 and $105,000.
• B) $0 and $145,000.
• C) ($40,000) and $105,000.
• D) ($40,000) and $145,000.
• E) None of the above.

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Definitions:

On Credit

The purchase of goods or services with the promise to pay at a future date.

Just Books

a term potentially referring to a concept of fairness in accounting practices, ensuring that records are accurate and truthful.

Incidental Beneficiary

A party who indirectly benefits from a contract but has no legal right to enforce the agreement made between other parties.

Donee Beneficiary

A third party that benefits from a contract between two other parties, to whom the promisor's performance is a gift.