Sandy,a Cash Method of Accounting Taxpayer,has a Basis of $46,000

question 37

Multiple Choice

Sandy,a cash method of accounting taxpayer,has a basis of $46,000 in her 500 shares of Newt Corporation stock.She receives the following distributions as part of Newt's plan of liquidation. The amount of the final distribution is not known on December 31,2007.What are the tax consequences of the distributions?

• A)Sandy will recognize a loss of $4,500 in 2007 and a $1,500 loss in 2008.
• B)Sandy will recognize the entire loss in 2007.
• C)Sandy will recognize the entire loss in 2008.
• D)None of the above is correct.

---

Definitions:

Discount Consumer Electronics

Retail or online stores offering electronic goods at reduced prices, typical of items that are surplus, refurbished, or off-season.

Storage Racks

Shelving units or frameworks designed for the organized storage of items, goods, or materials in both residential and commercial spaces.

Price Fixing

Price Fixing is an illegal practice where competing companies agree to set the same price for their products or services, eliminating competition.

Conspiracy

A secret plan by a group to do something unlawful or harmful, or the belief in such secret schemes.