Rita Owns a Horse Farm with 450 Acres of Land

question 58

Multiple Choice

Rita owns a horse farm with 450 acres of land (adjusted basis of $900,000) .Twenty-five acres of the land are condemned by the state for $250,000 in order to build a highway.Since the fair market value of Rita's farm is significantly decreased by the proximity to the future highway,the state awards Rita $225,000 in severance damages.Rita does not use the $225,000 to restore the usefulness of the farm and all of the $475,000 proceeds are invested in the stock market.What is her recognized gain or loss associated with the receipt of the severance damages?

• A)$0.
• B)$225,000.
• C)$250,000.
• D)$475,000.
• E)None of the above.

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Definitions:

Müller-Lyer Illusion

A visual illusion where lines of the same length appear to be different lengths due to arrow-like tails.

Ponzo Illusion

A visual illusion where two horizontal lines of identical length appear different in length because of converging parallel lines in the background.

Necker Effect

An optical illusion related to the perception of a two-dimensional drawing of a cube, which can spontaneously appear to switch orientation.

McCullough Effect

A phenomenon where prolonged exposure to colored gratings causes the visual system to adapt and see complementary colors in grayscale patterns.