Elizabeth Sells a Painting That Has a Fair Market Value

question 104

Multiple Choice

Elizabeth sells a painting that has a fair market value of $9,000 to Jonathan for $6,000. Which of the following statements about the tax effect of the sale is/are correct?
I.If Elizabeth is an art dealer and she sold the painting to Jonathan because she needed cash quickly, Jonathan does not recognize any income from the sale.
II.If Jonathan owns 60% of Elizabeth's company, Jonathan does not recognize any income from the sale.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Groupthink

A psychological phenomenon that occurs within a group of people in which the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome.

Group Polarisation

The tendency for a group to make decisions that are more extreme than the initial inclination of its members.

Extreme Decisions

Extreme decisions refer to choices made under conditions of high risk, uncertainty, or pressure, often with significant consequences.

Foot-In-The-Door

A psychological technique where agreeing to a small initial request increases the likelihood of compliance with a larger request later.