Phillip Owns Rental Real Estate with an Adjusted Basis of $200,000

question 136

Multiple Choice

Phillip owns rental real estate with an adjusted basis of $200,000. During the current year, he sells the property for $170,000.
I.If Phillip's rental activity is a trade or business, the loss is a Section 1231 loss.
II.If Phillip's rental activity is a production-of-income (investment) activity, the loss is a capital loss.
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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:

Target Firm

A company that has been identified as a potential acquisition target by another company or investor.

Equity Carve-Out

The sale of stock in a wholly owned subsidiary via an IPO.

Initial Public Offering

The first sale of stock by a private company to the public, marking a transition from a private to a publicly traded company.

Wholly Owned Subsidiary

A company whose entire stock is held by another company.