Your Cousin,who Is a CPA,calls You and Says That a Client

question 64

True/False

Your cousin,who is a CPA,calls you and says that a client paid him in diamonds and he's selling them.If you purchase one of those diamonds,at the time of the sale your cousin would be considered a merchant of those diamonds.

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Definitions:

Donee's Basis

The value assigned to a gift or inherited property for the purpose of determining gain or loss when the property is sold by the recipient.

FMV

The estimated sales price of an asset in the marketplace where both buyer and seller are informed and willing.

Code Sections 1245

Refers to a section of the U.S. Internal Revenue Code that deals with the recapture of depreciation upon the sale of certain types of business property.

Recapture Provisions

Regulations that allow the government to collect taxes on previously deducted or credited investment income when certain assets are sold or disposed of.