During 2012,Oxen Corporation Incurs the Following Transactions

question 48

Multiple Choice

During 2012,Oxen Corporation incurs the following transactions. Oxen maintains a valid S election and does not distribute any assets (cash or property) to its sole shareholder,Megan.As a result,Megan must recognize:

• A)Ordinary income of $103,000.
• B)Ordinary income of $103,000 and long-term capital gain of $5,000.
• C)Ordinary income of $103,000,long-term capital gain of $10,000,and $4,000 short-term capital loss.
• D)Ordinary income of $109,000.

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Definitions:

Instrument Value

The actual worth or significance of a financial document, like a stock or bond, in transactions.

Maker

The party in a financial transaction who creates or signs a promissory note, thereby agreeing to pay the note's value to a specified party.

Drawer

The person who writes or signs a bill of exchange, such as a check, thus creating a financial obligation.

Sight Draft

A financial instrument that is payable on presentation or sight to the drawer.