Wanda Bought 5 Acres of Land near Antler Mountain 13

question 124

Multiple Choice

Wanda bought 5 acres of land near Antler Mountain 13 years ago for $5,000. Recently, the U.S. Forest Service announced that a new ski area would be built on Antler Mountain next year. Wanda receives a telephone call from a representative of Omni Ski Corporation offering her $100,000 for the property. She rejected the offer saying she plans to hold onto the property for her grandchildren. What are the tax effects of these events?
I.Wanda will not report income because of the increased value of the property on her tax return for this year.
II.Realization occurs when the offer is given to Wanda.
III.Ability to pay occurred when the offer was extended to Wanda.
IV.Recognition only occurs when a sale is completed because of the realization concept.
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• A)Statements I and II are correct.
• B)Statements II and III are correct.
• C)Only statement IV is correct.
• D)Statements I and IV are correct.
• E)Statements I, III, and IV are correct.

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Definitions:

Professional Judgment

The ability to make decisions and draw conclusions in one’s professional field based on expertise, experience, and ethics.

Exploiting the Client

Acting unethically by taking unfair advantage of a client for personal, financial, or other gains, contradicting professional ethical standards.

Dual Relationship

Ethical dilemma arising when a professional holds more than one role with a client, potentially compromising objectivity and confidentiality.

Family History

A record of a person's background including health, genetic conditions, and relationships within the family.