Juanita Is a Sole Proprietor Who Has Some Outstanding Receivables

question 110

Multiple Choice

Juanita is a sole proprietor who has some outstanding receivables she wishes to sell.The receivables have a $16,000 FMV and a basis of $10,000.Juanita sells the receivables for $12,500.What gain or loss does Juanita recognize on the sale?

• A)$3,500 capital loss.
• B)$2,500 ordinary gain.
• C)$2,500 capital gain.
• D)$3,500 ordinary loss.

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Definitions:

Corporation

A legal entity that is separate and distinct from its owners, providing limited liability protection to its shareholders.

Investors

Individuals or entities that allocate capital with the expectation of receiving financial returns.

Dissolves

To formally end or terminate something, such as a contractual agreement or a business entity like a corporation.

Corporation

A legal entity that is separate from its owners, with an independent existence that allows it to own property, enter contracts, and be liable for its actions.