During 2013,Track Corporation Distributes Property to Cindy as Part of a Complete

question 102

Multiple Choice

During 2013,Track Corporation distributes property to Cindy as part of a complete liquidation.Property included in the distribution is $30,000 in cash,land with a $40,000 adjusted basis and a $60,000 FMV,and a copyright without an ascertainable FMV and having a zero basis.The first payment to Cindy of $8,000 for use of the copyrighted property occurs in 2014.Cindy has a basis in the Track stock of $95,000 immediately preceding the liquidation.The minimum amount of gain that Cindy must recognize is a

• A)$3,000 gain in 2014.
• B)$0 gain in 2013.
• C)$3,000 gain in 2013,which is reported on an amended current-year tax return that is filed in 2014.
• D)none of the above

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Definitions:

Moral-Hazard Problem

The moral-hazard problem arises in situations where one party's willingness to take risks is increased because the negative consequences of those risks will be borne by another party.

Principal-Agent Problem

A dilemma in economics where one party (agent) is supposed to act in the best interest of another (principal) but may have a tendency to act in their own interest.

Asymmetric Information

A situation in which one party in a transaction has more or superior information compared to the other.

Informational Asymmetry

A situation where one party in a transaction has more or better information compared to another, potentially leading to an imbalance in power or unfair transactions.