Gold Company Was Experiencing Financial Difficulties, but Was Not Bankrupt

question 44

Multiple Choice

Gold Company was experiencing financial difficulties, but was not bankrupt or insolvent. The National Bank, which held a mortgage on other real estate owned by Gold, reduced the principal from $110,000 to $85,000. The bank had made the loan to Gold when it purchased the real estate from Silver, Inc. Pink, Inc., the holder of a mortgage on Gold's building, agreed to accept $40,000 in full payment of the $55,000 due. Pink had sold the building to Gold for $150,000 that was to be paid in installments over 8 years. As a result of the above, Gold must:

• A) Include $40,000 in gross income.
• B) Reduce the basis in its assets by $40,000.
• C) Include $25,000 in gross income and reduce its basis in its assets by $15,000.
• D) Include $15,000 in gross income and reduce its basis in the building by $25,000.
• E) None of these.

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Definitions:

Innate

Qualities or abilities that are inherent and naturally present in an individual from birth, not acquired through learning or experience.

Conscious Perception

The awareness and interpretation of sensory stimuli while one is awake and aware.

Unconscious Psychic Energy

A concept in psychoanalytic theory referring to the underlying energy that powers human drives and desires, often outside of conscious awareness.

Person-Centered Therapy

Rogers’s approach to therapy in which the client (not the “patient”) is assumed to be responsible for changing his or her personality.