Mr and Mrs

question 37

Multiple Choice

Mr. and Mrs. Sykes operate a very profitable small business. This year, the Sykes recognized a $100,000 gain on sale of a trade name they had created and copyrighted for use in their business. Which of the following statements is true?

• A) The $100,000 gain is capital gain eligible for a preferential tax rate.
• B) The $100,000 gain is capital gain against which the Sykes can deduct any capital losses recognized this year.
• C) The $100,000 gain is ordinary business income.
• D) Statements A and B are true.

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Definitions:

Liquidity

A measure of how easily assets can be converted into cash without significant loss of value.

Supplier

A party that provides goods or services to another entity, typically in a B2B (business-to-business) relationship.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations, calculated by dividing current assets by current liabilities.

Asset Turnover Ratio

A financial metric that measures how efficiently a company uses its assets to generate sales revenue.