Pedro Borrowed $250,000 to Purchase a Machine Costing $300,000

question 183

Multiple Choice

Pedro borrowed $250,000 to purchase a machine costing $300,000. He later borrowed an additional $25,000 using the machine as collateral. Both notes are nonrecourse. Eight years later, the machine has an adjusted basis of zero and two outstanding note balances of $145,000 and $18,000. Pedro sells the machine subject to the two liabilities for $45,000. What is his realized gain or loss?

• A) $0
• B) $45,000
• C) $163,000
• D) $208,000
• E) None of the above

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Definitions:

Intellectual Development

The growth and change in mental abilities and processing capabilities, including reasoning, problem-solving, and learning.

Deprived Environment

A setting or situation lacking in the basic resources, stimulation, or conditions necessary for physical, emotional, and intellectual development.

Intelligence Scores

Quantitative measures obtained from intelligence tests that aim to represent an individual's cognitive abilities relative to an average performance for a given age.

Heritability

A statistical measure that indicates how much of a trait's variation in a population can be attributed to genetic factors.