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:

Voltage Regulator

A device that maintains a constant voltage level to electrical equipment to prevent damage from voltage fluctuations.

Effective Cycle

A measurement or period in which a system or component operates at its intended efficiency and performance level.

Drive Pulley

A pulley connected to a power source that transmits rotational motion and power to a belt, chain, or other mechanism.

Alternator Pulley Ratio

The alternator pulley ratio is the ratio between the rotation speed of the alternator pulley and the engine crankshaft. It is crucial for ensuring the alternator operates efficiently at various engine speeds.