In September of 2014,Michelle Sold Shares of Qualified Small Business

question 64

Multiple Choice

In September of 2014,Michelle sold shares of qualified small business stock for $1,000,000 that had a basis of $200,000.She had held the stock for 7 months.Forty-five days after the sale she purchased other qualified small business stock for $1,100,000.How much of the gain will she recognize?

• A)$ 0
• B)$100,000
• C)$800,000
• D)$900,000

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Definitions:

Decreasing Returns To Scale

Long-run average total cost increases as output increases (also known as diseconomies of scale).

Economies Of Scale

The cost advantages that enterprises obtain due to their scale of operation, typically resulting in cost per unit of output decreasing with increasing scale.

Diminishing Returns

A principle stating that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.

Production Function

The relationship between the quantity of inputs a firm uses and the quantity of output it produces.