Patti Sells a Painting That Has a Fair Market Value

question 1

Multiple Choice

Patti sells a painting that has a fair market value of $9,000 to James for $6,000. Which of the following statements about the tax effect of the sale is/are correct?
I.If James is an employee of Patti's, no income is recognized from the sale.
II.If James is Patti's brother, James does not recognize any income from the sale.
III.If Patti is an art dealer and she sold the painting to James because she needed cash quickly, James does not recognize any income from the sale.
IV.If James owns 60% of Patti's company, James does not recognize any income from the sale.
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• A)Only statement II is correct.
• B)Only statement III is correct.
• C)Only statements II, and III are correct.
• D)Only statements II, III, and IV are correct.
• E)Statements I, II, III, and IV are correct.

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Definitions:

Destination

The intended end point or goal of a journey or an effort.

Feedback

Information provided as a response to a process or activity, used as a basis for improvement, learning, or performance adjustment.

Richness

The quality or state of being abundant or in great quantities, often used in the context of material wealth, cultural wealth, or biodiversity.

Feedback

Information provided regarding aspects of one's performance or behavior, intended to affirm strengths or identify areas for improvement.