Which of the Following Events Causes the Purchaser of an Option

question 47

Multiple Choice

Which of the following events causes the purchaser of an option to add the cost of the option to the basis of the property to which the option relates?

• A)The option is exercised.
• B)The option is sold.
• C)The option lapses.
• D)The option is rescinded.
• E)None of these.

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Definitions:

Tax Burden

The financial charge or other levy imposed upon a taxpayer by a governmental organization in order to fund various public expenditures.

Economically Rational

Decision-making based on the principle of maximizing benefits while minimizing costs and resources.

Myopia

Refers to the difficulty human beings have with conceptualizing the more distant future. Leads to decisions that overly favor present and near-term options at the expense of more distant future possibilities.

Great Depression

A severe global economic downturn that lasted from 1929 to the late 1930s, marked by massive unemployment and the collapse of financial institutions.