Norman Exchanges a Machine He Uses in His Pool Construction

question 67

Multiple Choice

Norman exchanges a machine he uses in his pool construction business for a used machine worth $6,000 to use in the same business.He purchased the machine 3 years ago for $22,000 and has taken depreciation of $9,000 on the machine.In the exchange,Norman also receives $3,000 of cash.As a result of the exchange,
I.Norman's basis in the acquired machine is $10,000.
II.Norman recognizes a loss of $3,000 on the exchange.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Rule of Reason

A legal doctrine used in antitrust law that considers the context and circumstances of a business practice to determine its legality.

Clayton Act

An amendment to United States antitrust law, aiming to prevent specific practices of anticompetitive behavior not covered by the Sherman Act.

Price Discrimination

A pricing approach in which the same provider sells identical or nearly identical products or services for different prices across various markets.

Tying Contracts

Agreements where the buyer of a particular product is forced to buy an additional product from the same seller.