Elizabeth Sells a Painting That Has a Fair Market Value

question 104

Multiple Choice

Elizabeth sells a painting that has a fair market value of $9,000 to Jonathan for $6,000. Which of the following statements about the tax effect of the sale is/are correct?
I.If Elizabeth is an art dealer and she sold the painting to Jonathan because she needed cash quickly, Jonathan does not recognize any income from the sale.
II.If Jonathan owns 60% of Elizabeth's company, Jonathan does not recognize any income from the sale.
​

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

---

Definitions:

Marginal Cost

The cost increase associated with the production of an extra unit of a product or service.

Market Price

The present cost at which a product or service is available for purchase or sale in the market.

Market Price

The current value at which a good or service can be bought or sold in a marketplace, influenced by supply and demand.

Profit-Maximizing

Refers to the process or strategy aimed at achieving the highest possible profit, where marginal cost equals marginal revenue.