Kathy Was a Shareholder in Matrix, Inc

question 13

Multiple Choice

Kathy was a shareholder in Matrix, Inc., when she sold the corporation a commercial building.The building cost $500,000 and the balance in the accumulated depreciation account was $400,000. Matrix, Inc., paid $100,000 in the year of sale and gave Kathy a note for $400,000 plus adequate interest due in 2014.

• A)Because Kathy is a shareholder in Matrix, she cannot report the gain by the installment method.
• B)Generally, if Kathy owned 100% of the Matrix stock, Kathy cannot use the installment method.
• C)Generally, if Kathy owned only 60% rather than 100% of the Matrix stock, she could use the installment method.
• D)Kathy cannot use the installment method to report the gain because the realized gain is equal to the depreciation she claimed on the building.
• E)None of the above.

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Definitions:

Friendly Suitor

A company or individual that makes a benign and often consensual offer to buy or merge with another company, as opposed to a hostile takeover.

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A strategic communication process that builds mutually beneficial relationships between organizations and their publics.

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An American retail corporation, the eighth-largest in the United States, which operates a chain of discount stores offering various goods.

Shareholders

Individuals or entities that own one or more shares of stock in a corporation, giving them partial ownership and usually voting rights.