P and Its Wholly Owned Subsidiary S File a Consolidated

question 36

Multiple Choice

P and its wholly owned subsidiary S file a consolidated return on a calendar year basis.On February 1, 2012 P sells land to S for $30,000.P's basis in the land was $20,000.S held the land until July 20, 2013, whereupon it sold it to an unrelated party for $40,000.What amount and type of income should P report in the consolidated return for 2012?

• A)$0
• B)$10,000, § 1231
• C)$10,000, § 1250
• D)$20,000, § 1231
• E)$20,000, § 1250

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Definitions:

Interest Rate

A financial term denoting the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Equilibrium Interest Rate

The interest rate at which the demand for loanable funds equals the supply of loanable funds, balancing savings and investment in the economy.

Total Spending

The sum of all expenditures made by consumers, businesses, and the government within an economy over a specific period.

Riskier Loans

Loans that carry a higher chance of default compared to standard loans, often resulting in higher interest rates to compensate for the increased risk.