Arthur Owns a Tract of Undeveloped Land (Adjusted Basis of $145,000)

question 85

Multiple Choice

Arthur owns a tract of undeveloped land (adjusted basis of $145,000) which he sells to his son, Ned, for its fair market value of $105,000. What is Arthur's recognized gain or loss and Ned's basis in the land?

• A) $0 and $105,000.
• B) $0 and $145,000.
• C) ($40,000) and $105,000.
• D) ($40,000) and $145,000.
• E) None of the above.

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Definitions:

Dividends

Dividends are a portion of a company's earnings that are distributed to shareholders as a reward for their investment.

Depreciation Expense

The allocation of the cost of a tangible fixed asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Interest Expense

Expenses related to borrowed capital for an entity, which includes loans, bonds, and lines of credit.

Prior Year

Refers to the accounting period immediately preceding the current period, often used for comparative financial analysis.