Wallace and Pedersen Have Equal Interests in the Capital and Profits

question 80

Multiple Choice

Wallace and Pedersen have equal interests in the capital and profits of the partnership of Wallace and Pedersen, but are otherwise unrelated. On August 1, 2016, Wallace sold 100 shares of Kalmia Mining Corporation to the partnership for its fair market value of $7,000. Wallace had bought the stock in 2007 at a cost of $10,000. What is Wallace's deductible loss for 2016 as a result of the sale of this stock?

• A)$0
• B)$1,500 long-term capital loss
• C)$3,000 long-term capital loss
• D)$3,000 ordinary loss
• E)None of the above

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Definitions:

Investment Turnover

A measure of a company's efficiency in using its assets to generate sales or revenue; calculated by dividing sales over a period by the average investment.

Profit Margin

A financial metric that measures the amount of net income earned with each dollar of sales by comparing net income and net sales.

Investment Turnover

A measure of a company's efficiency in using its assets to generate sales or revenue; the ratio of the cost of goods sold to the average inventory.

Managerial Efficiency

The effectiveness with which managers utilize resources and make decisions to achieve the organization's goals.