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

question 6

Multiple Choice

A corporation owns many acres of timber,which it acquired three years ago,and which has a $120,000 basis.The timber was cut last year for use in the corporation's business.The FMV of the timber on the first day of last year was $270,000.The corporation made the appropriate election to treat the cutting as a sale or exchange.The timber is sold for $300,000 this year.The tax result this year is

• A)recognition of capital gain of $30,000.
• B)recognition of Sec.1231 gain of $30,000.
• C)recognition of ordinary income of $30,000.
• D)no income recognized since all recognition occurs in the year of the cutting of the timber.

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Definitions:

Contract

A legally binding agreement between two or more parties, enforceable by law, with obligations and conditions that need to be fulfilled.

Contract Law

The branch of law dealing with the formation, interpretation, and enforcement of agreements between parties.

Untrue Statements

Assertions or claims that are false, misleading, or not aligned with the truth.

Liquidated Debt

A debt whose exact monetary value has been determined and agreed upon by all parties involved.