In 2007,Gaylord Purchased 100 Shares of Stock of Chisel Corporation

question 103

Multiple Choice

In 2007,Gaylord purchased 100 shares of stock of Chisel Corporation for $200 per share.In 2017,Gaylord sells all of the shares for $19,000.What are the effects of these events?
I.The capital recovery concept prevents the recognition of any income.
II.Gaylord reports $1,000 of ordinary income for tax year 2017.
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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:

Income Elasticity

A measure of how much the demand for a good or service changes in response to changes in consumer income.

Inferior Good

A type of good whose demand decreases when consumers' income increases, opposite to normal goods.

Demand Elastic

A measure of how sensitive the quantity demanded of a good or service is to a change in its price.

Supply Inelastic

A situation where the quantity supplied of a good is not significantly affected by changes in its price.