The Primary Difference Between the "Payoff" and the "Purchase and Assumption

question 54

Multiple Choice

The primary difference between the "payoff" and the "purchase and assumption" methods of handling failed banks is that the FDIC

• A) guarantees all deposits, not just those under the $250,000 limit, when it uses the "payoff" method.
• B) guarantees all deposits, not just those under the $250,000 limit, when it uses the "purchase and assumption" method.
• C) is less likely to use the "payoff" method when the bank is large and it fears that depositor losses may spur business bankruptcies and other bank failures.
• D) does both A and B of the above.
• E) does both B and C of the above.

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Definitions:

Schedule C

A form used by self-employed individuals or sole proprietors to report their business income and expenses to the IRS.

Ordinary Gain

Ordinary gain refers to the profit that arises from the sale of an asset or property, which is taxable at standard income tax rates.

Receivables

Money owed to a business by its clients or customers for goods or services that have been delivered but not yet paid for.

Artistic Works

Original items or creations, like paintings, music, literature, etc., often protected by copyright law.