Walter Sold Land (A Capital Asset) to an Unrelated Party

question 80

Multiple Choice

Walter sold land (a capital asset) to an unrelated party for $100,000 cash and a 4% note for $150,000 due in three years.His basis in the land was $40,000.Walter and the purchaser are cash basis taxpayers.Which of the following statements is correct?

• A)If the Federal rate is 3%, interest will be imputed at that rate.
• B)If the Federal rate is 5%, interest will be imputed at that rate and the capital gain will be reduced.
• C)If the Federal rate is 4.5%, interest will be imputed at that rate and the capital gain will be increased.
• D)All of these.
• E)None of these.

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Definitions:

Regional Governments

Governmental authorities that manage and administer specific geographic regions within a country, focusing on the unique needs and interests of those regions.

Necessary

Essential or needed to achieve a certain result or outcome.

Supremacy Clause

A provision in the U.S. Constitution declaring that federal law prevails over state law when there is a conflict between them.

Federal System

A system of government in which power is divided between a central authority and constituent political units (such as states or provinces), allowing for a balance of power.