Nagin IncTransferred an Old Asset in Exchange for a New Asset

question 101

Multiple Choice

Nagin Inc.transferred an old asset in exchange for a new asset worth $84,000 and $6,000 cash.The old asset and new asset were like-kind properties.Which of the following statements is true?

• A)If Nagin's basis in the old asset was $95,000,Nagin can recognize a $5,000 loss.
• B)If Nagin's basis in the old asset was $85,000,Nagin must recognize a $6,000 gain.
• C)If Nagin's basis in the old asset was $79,200,Nagin must recognize a $6,000 gain.
• D)None of the above is true.

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Definitions:

Consumption

The consumption of products and services by individuals in a household.

Impossibility Theorem

A proposition demonstrated by Kenneth Arrow showing that no system of aggregating individual preferences into social decisions will always yield consistent, nonarbitrary results.

Voting Paradox

A simple demonstration of how majority-rule voting can lead to seemingly contradictory and inconsistent results. A commonly cited illustration of the kind of inconsistency described in the impossibility theorem.

Social Choice

The problem of deciding what society wants. The process of adding up individual preferences to make a choice for society as a whole.