If Section 1231 Applies to the Sale or Exchange of an Unharvested

question 21

Multiple Choice

If Section 1231 applies to the sale or exchange of an unharvested crop sold with land,the costs of producing the crop are

• A)capitalized.
• B)deducted as an expense of operations when incurred and also deducted from the sales price at the time of the sale.
• C)deducted when incurred if the land is sold but capitalized if the land is exchanged.
• D)deducted as an expense of operations when incurred.

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Definitions:

Present Value Factors

Numerical factors used to calculate the present value of a future amount by considering the time value of money and interest rates.

Operating Lease

A contract that allows for the use of an asset but does not convey rights similar to ownership, typically shorter term and cancellable.

Future Rentals

Expected or scheduled payments for the use of tangible assets (such as real estate or equipment) over the duration of a lease agreement.

Contingent Rentals

Contingent Rentals are lease payments that are not fixed or established in advance but depend on a future event or condition, like a percentage of sales.