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:

Primary Colors

The set of colors that can be combined to create a wide spectrum of colors but cannot be created by mixing other colors. Typically red, blue, and yellow in pigment or red, green, and blue in light.

Additive Colors

A color system in which colors are created by mixing various amounts of light colors, primarily red, green, and blue.

Oval Window

A membrane-covered opening that leads from the middle ear to the vestibule of the inner ear, where sound vibrations are transmitted.

Cochlea

A spiral-shaped, fluid-filled organ in the inner ear that is responsible for converting sound vibrations into nerve impulses that the brain can interpret as sound.