A Shareholder Can Defer the Recognition of Gain on Liquidation

question 12

True/False

A shareholder can defer the recognition of gain on liquidation when an installment note is received, if the note arose from the sale of all the corporation's assets within the 12-month period starting with the adoption of the plan of liquidation.

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Definitions:

Invested Capital

The total amount of money invested into a company by shareholders and debtors, used to fund the company's operations and growth.

Residual Income

Income that remains after all costs and expenses, including a charge for capital, have been deducted.

Return On Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the net profit of the investment by its initial cost.

Cost Of Capital

Cost of capital represents the return rate that a company must achieve to maintain its market value, affecting its ability to invest in new projects or assets.