The Blue Utilities Company Paid Sue $2,000 for the Right

question 25

Multiple Choice

The Blue Utilities Company paid Sue $2,000 for the right to lay an underground electric cable across her property anytime in the future.

• A)Sue must recognize $2,000 gross income in the current year if the company did not install the cable during the year.
• B)Sue is not required to recognize gross income from the receipt of the funds, but she must reduce her cost basis in the land by $2,000.
• C)Sue must recognize $2,000 gross income in the current year regardless of whether the company installed the cable during the year.
• D)Sue must recognize $2,000 gross income in the current year, and when the cable is installed, she must reduce her cost basis in the land by $2,000.
• E)None of these.

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Definitions:

Passive

Accepting or allowing what happens or what others do, without active response or resistance.

Overexposing

The act of providing too much information or stimulus to the point where it becomes overwhelming or has a negative effect.

Phenomenon

An observable event or fact, especially one that is not fully understood or that is out of the ordinary.

Behavioural Change

Modifications in individual actions or habits typically resulting from intervention or self-improvement efforts.