Which of the Following Statements Regarding Recapture Is True

question 7

Multiple Choice

Which of the following statements regarding recapture is true?

• A)Recapture occurs when there is a positive balance in a class pool, even if there are assets remaining in that class pool.
• B)Recapture occurs when there is a negative balance in a class pool, even if there are assets remaining in that class pool.
• C)Recapture may be deducted from business income.
• D)Recapture only occurs when there is a positive balance in a class pool and that pool of assets is empty.

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Definitions:

Municipal Bonds

Fixed-income securities issued by cities, states, or other local government entities to finance public projects.

Taxable Corporate Bond

A fixed-income security issued by a corporation that is subject to taxes on the interest income received by the bondholder.

Pretax Equivalent

Pretax Equivalent is a term used in finance to describe the gross amount of income or yield before taxes are deducted, useful for comparing investments with different tax treatments.

Uncollected Receivables

Amounts owed to a company by customers for goods or services delivered but not yet paid for.