The Blue Utilities Company Paid Sue $2,000 for the Right

question 25

Multiple Choice

The Blue Utilities Company paid Sue $2,000 for the right to lay an underground electric cable across her property anytime in the future.

• A)Sue must recognize $2,000 gross income in the current year if the company did not install the cable during the year.
• B)Sue is not required to recognize gross income from the receipt of the funds, but she must reduce her cost basis in the land by $2,000.
• C)Sue must recognize $2,000 gross income in the current year regardless of whether the company installed the cable during the year.
• D)Sue must recognize $2,000 gross income in the current year, and when the cable is installed, she must reduce her cost basis in the land by $2,000.
• E)None of these.

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Definitions:

Community Service

Voluntary work intended to help people in a particular area, often mandated by courts as part of sentencing.

Emotional Stability

A personality trait characterized by the consistency of one's emotions and a low tendency toward emotional fluctuations.

Emotionally Meaningful

Pertains to experiences or events that hold significant emotional importance to an individual, deeply influencing feelings and behavior.