Gold Corporation Sold Its 40% of the Ruby Corporation Common

question 70

Multiple Choice

Gold Corporation sold its 40% of the Ruby Corporation common stock.Gold received $8,000,000 in the year of the sale and a note for $12,000,000,payable in three years with interest at the Federal rate.Gold's basis in the stock was $2,000,000.Assume that Gold Corporation will report the gain by the installment method where the method is permitted.

• A)If the Ruby Corporation stock is traded on a national exchange,Gold must recognize $18,000,000 gain in the year of sale.
• B)If the Ruby Corporation stock is not traded on an established market,Gold must recognize a $7,200,000 gain in the year of sale.
• C)If the Ruby Corporation stock is not traded on a national exchange,Gold must pay interest on a portion of the deferred taxes.
• D)All of the above are true.
• E)None of the above is true.

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Definitions:

Land

A natural resource representing the earth's surface not including any structures; often considered a fixed asset in accounting.

Intangible

An asset that lacks physical substance, such as intellectual property, brand names, or goodwill.

Operations

Operations refer to the day-to-day activities involved in the running of a business for the purpose of producing value for the stakeholders.