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:

Activity-based Management System

A system that uses activity-based costing information to improve business processes and resource allocation, enhancing operational efficiency.

Real Causes

The underlying reasons or factors that lead to a certain effect or condition, often distinguished from more visible or immediate causes.

Value Engineering

A systematic method aimed at improving the "value" of goods or products and services by using an examination of function. Value is the ratio of function to cost.

Non-value-adding Activities

Tasks or processes that do not add value to the final product or service from the customer's perspective.