Webster, who owns all the Bear Corporation stock, purchases a dump truck from Bear Corporation in January. The truck cost $12,000 and has a $10,000 adjusted basis at the time of the sale. Webster pays Bear the truck's $8,000 FMV. Later in the same year, Webster sells the dump truck to an unrelated party for $6,000. Webster can recognize a loss of
A) $4,000.
B) $2,000.
C) $3,000.
D) $5,000.
B) $2,000.
Webster and Bear Corporation are related parties under Sec. 267(b). The $2,000 loss on Bear Corporation's sale to Webster is disallowed. However, no disallowance of the $2,000 loss occurs on the sale by the purchaser to an unrelated party. The disallowed loss on the first sale cannot be used by Webster when he sells the truck unless he has a gain to offset it against. In this problem, he has a $2,000 loss ($6,000 sales price - $8,000 basis).
You might also like to view...
One common form of Internet fraud is phishing, a type of identity theft that uses deceptive e-mails and fraudulent online sites to fool users into divulging personal data
Indicate whether the statement is true or false
If a firm produces more units than it sells, absorption costing, relative to variable costing, will result in
a. higher income and assets. b. higher income but lower assets. c. lower income but higher assets. d. lower income and assets.
When indirect materials are added to a job, the ?????????????????????????????? account is debited
A manager weighs three options for capacity cushion as depicted in Figure 4.1. If the dollar amounts expressed in the figure are cash flows, which option is optimal?
A) large cushion B) medium cushion C) small cushion D) Not enough information is given to select an option.