Gold Corporation Sold Its 40% of the Ruby Corporation Common

question 3

Multiple Choice

Gold Corporation sold its 40% of the Ruby Corporation common stock. Gold received $10 million in the year of the sale and a note for $15 million, payable in three years with interest at the Federal rate. Gold's basis in the stock was $5 million. Assume that Gold Corporation will report the gain by the installment method where the method is permitted.

• A) The installment method is never permitted on the sale of stock.
• B) If Ruby Corporation stock is traded on an established securities market, Gold must recognize a $20 million gain in the year of sale.
• C) If the Ruby Corporation stock is not traded on a national exchange, Gold must recognize a $20 million gain.
• D) All of the above are true.
• E) None of the above is true.

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