Paul Sells One Parcel of Land (Basis of $100,000) for Its

question 193

Multiple Choice

Paul sells one parcel of land (basis of $100,000) for its fair market value of $160,000 to a partnership in which he owns a 60% capital interest. Paul held the land for investment purposes. The partnership is in the real estate development business and will build residential housing (for sale to customers) on the land (the land is inventory to the partnership) . Paul will recognize:

• A) $0 gain or loss.
• B) $36,000 ordinary income.
• C) $36,000 capital gain.
• D) $60,000 ordinary income.
• E) $60,000 capital gain.

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Definitions:

Anticipates

The act of expecting or predicting something in advance, allowing for preparedness and strategical planning.

Retail Chain

A network of stores owned by the same company, offering a variety of products or services across multiple locations.

Systematic

An approach characterized by a methodical and organized procedure or process.

Step-By-Step Fashion

A methodology or process that proceeds sequentially, one step at a time.