A Corporation Owns Many Acres of Timber,which It Acquired Three

question 4

Multiple Choice

A corporation owns many acres of timber,which it acquired three years ago,and which has a $150,000 basis for depletion.The timber is cut during the current year for use in the corporation's business.The FMV of the timber on the first day of the current year is $280,000.If the corporation makes the appropriate election,the tax result is

• A)recognition of a Sec.1231 gain of $130,000.
• B)no recognition of gain or loss since the timber is used in the business.
• C)recognition of a gain at the time of sale if the timber is later sold with the gain equal to the sales price less the basis in the timber.
• D)recognition of a gain if the timber is later sold with the gain equal to the sales price less $280,000 (FMV on the first day of the year of the cutting).

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Definitions:

CFCs

Chlorofluorocarbons; chemical compounds used in aerosol sprays and refrigerants that have been found to deplete the ozone layer.

Adverse Selection

A situation in which one party in a transaction has more information than the other, often leading to the selection of poorer-quality goods or higher-risk individuals.

Seller Ratings

Evaluations or scores given to sellers on e-commerce platforms, based on the quality of their products, shipping speed, and customer service.

Moral Hazard

A situation where one party is more likely to take risks because another party bears the cost of those risks, often seen in insurance and financial sectors.