Walter Sold Land (A Capital Asset) to an Unrelated Party

question 80

Multiple Choice

Walter sold land (a capital asset) to an unrelated party for $100,000 cash and a 4% note for $150,000 due in three years. His basis in the land was $40,000. Walter and the purchaser are cash basis taxpayers. Which of the following statements is correct?

• A) If the Federal rate is 3%, interest will be imputed at that rate.
• B) If the Federal rate is 5%, interest will be imputed at that rate and the capital gain will be reduced.
• C) If the Federal rate is 4.5%, interest will be imputed at that rate and the capital gain will be increased.
• D) All of the above.
• E) None of the above.

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Definitions:

Economy Moves

Economic activities or shifts that influence the overall growth, stability, or direction of an economy.

Supply

The total amount of a specific good or service that is available to consumers at a given price and time.

Quantity Supplied

The amount of a good or service that producers are willing to offer for sale at a particular price over a given period of time.

Economy Moves

The dynamic changes and shifts in economic activity and trends over time, including growth, recession, and recovery phases.