Jerry and Sally Were Divorced Under an Agreement Executed July

question 39

Multiple Choice

Jerry and Sally were divorced under an agreement executed July 1, 2016. The terms of the agreement provide that Jerry will transfer to Sally his interest in a rental house worth $250,000 with a tax basis to Jerry of $80,000. What is the amount of the gain that must be recognized by Jerry on the transfer of the property and what is Sally's tax basis in the property after the transfer, respectively?

• A)$170,000 and $250,000
• B)$0 and $250,000
• C)$170,000 and $170,000
• D)$0 and $80,000
• E)None of the above

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Definitions:

Industry Profits

The total earnings of companies within a particular industry, after subtracting all costs from total revenue.

Economically Break Even

The point where total revenues equal total costs, resulting in zero economic profit.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent or salaries.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for competition on factors other than price.