In Return for $1,000, Mr

question 65

Multiple Choice

In return for $1,000, Mr. Hand cancels Mr. Sandwich's debt of $4,000. fte cancellation is not a gift and Mr. Sandwich is neither insolvent nor bankrupt. Which of the following statements is correct?

• A) Mr. Hand has $1,000 taxable income.
• B) Mr. Sandwich has $3,000 of taxable income.
• C) Mr. Sandwich has $4,000 of taxable income.
• D) Neither Mr. Hand nor Mr. Sandwich has any taxable income from this transaction.

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Definitions:

Arousal Theory

A theory of motivation suggesting that people are motivated to maintain an optimal level of alertness and physical and mental activation.

Extrinsic Motivation

Motivation driven by external rewards, such as money, fame, grades, or praise.

Intrinsic Motivation

The drive to perform activities for the inherent satisfaction or pleasure derived from doing the activity itself, rather than for an external reward.

External Reward

Any benefit or reinforcement received from the environment in response to an action, often motivating behavior.