Paul Sells One Parcel of Land (Basis of $100,000) for Its

question 47

Multiple Choice

Paul sells one parcel of land (basis of $100,000) for its fair market value of $160,000 to a partnership in which he owns a 60% capital interest.Paul held the land for investment purposes.The partnership is in the real estate development business, and will build residential housing (for sale to customers) on the land.Paul will recognize:

• A)$0 gain or loss.
• B)$36,000 ordinary income.
• C)$36,000 capital gain.
• D)$60,000 ordinary income.
• E)$60,000 capital gain.

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Definitions:

Economic Recession

A period of temporary economic decline during which trade and industrial activities are reduced, generally identified by a fall in GDP in two successive quarters.

Civil Rights

The rights of citizens to political and social freedom and equality, often associated with movements to end discrimination and promote equal protection under the laws.

Underwood Tariff

A 1913 U.S. law that significantly lowered tariffs on imported goods for the first time since the Civil War and implemented an income tax following the ratification of the 16th Amendment.

Tariff Rates

Taxes imposed by a government on imported or exported goods.