Dreamland Corporation Purchased 10,000 Shares of Sleepytime, Inc

question 57

Multiple Choice

Dreamland Corporation purchased 10,000 shares of Sleepytime, Inc. common stock for $200,000 on February 19, 2013. On December 31, 2013, the value of the Sleepytime stock declines to $180,000. Dreamland sells the Sleepytime stock for $170,000 on January 10, 2014. Dreamland does not recognize a loss on the stock in 2013, but does recognize a loss of $30,000 in 2014. Which of the following Concepts, Constructs, and/or Doctrines form the basis for this treatment? I. Realization Concept. II. Related Party Provisions. III. Capital Recovery Concept. IV. Tax Benefit Rule.

• A) Statements I and II are correct.
• B) Statements I and III are correct.
• C) Statements II and IV are correct.
• D) Statements I, II and III are correct.
• E) Statements I, III and IV are correct.

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Definitions:

Summons

A legal document issued by a court and addressed to a defendant that notifies him or her of a lawsuit and specifies how and when to respond to the complaint. A summons may be used in both civil and criminal proceedings.

Service Document

A legal document or form that is served to parties involved in a legal process or transaction, indicating compliance with certain legal procedures or steps.

Ripeness

A measure of the readiness of a case for a decision to be made; designed to prevent premature litigation for a dispute that is insufficiently developed. A claim is not ripe for litigation if it rests on contingent future events that may not occur as anticipated or may not occur at all.

Moot

Moot refers to an issue that has been resolved or has become irrelevant, thus, no longer requiring a decision to be made by a court.