In Which Transaction Did the Donor/seller Not Recognize a Gain

question 34

Multiple Choice

In which transaction did the donor/seller not recognize a gain?

• A)A gave his car to his brother, who took over the 12 months of payments remaining due; the indebtedness represented by the remaining payments exceeded A's basis in the car at the time of the transfer.
• B)B sold a boat with a basis of $40,000 and fair market value of $60,000 to her nephew for $50,000.
• C)C sold a cabin with a basis of $45,000 and fair market value of $50,000 to his niece for $50,000.
• D)D gave her sister securities with a basis and fair market value of $25,000 in exchange for $10,000 in cash and a five-year, $15,000 note at 10 percent interest.

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Definitions:

Vesting

The concept of imposing equity forfeitures on cofounders over a certain period of time on a piecemeal basis should they not stay with the company.

Equity Forfeitures

Situations where shareholders or stockholders must give up their ownership stakes, often due to contractual agreements or failure to meet certain conditions.

Cofounders

Individuals who jointly start a business or enterprise, sharing the risks and rewards of the company's development and success.

Legal Structure

The organizational framework within which a business operates, determining its legal obligations, tax liabilities, and governance.