During 2017, Track Corporation distributes property to Cindy as part of a complete liquidation. Property included in the distribution is $30,000 in cash, land with a $40,000 adjusted basis and a $60,000 FMV, and a copyright without an ascertainable FMV and having a zero basis. The first payment to Cindy of $8,000 for use of the copyrighted property occurs in 2018. Cindy has a basis in the Track
stock of $95,000 immediately preceding the liquidation. The minimum amount of gain that Cindy must recognize is a
A) $3,000 gain in 2018.
B) $0 gain in 2017.
C) $3,000 gain in 2017, which is reported on an amended current-year tax return that is filed in 2018.
D) none of the above
B) $0 gain in 2017.
No gain is recognized since the copyright does not have an ascertainable FMV and Cindy can apparently rely on the open transaction doctrine to determine her gain or loss. Cindy has a $5,000 [($30,000 + $60,000) - $95,000] unrecovered basis immediately after the liquidation. The receipt of the first payment of $8,000 results in a $3,000 ($8,000 - $5,000) gain being recognized in the following year.
You might also like to view...
Depreciation expense provides a tax shield against the payment of taxes
Indicate whether the statement is true or false
If a debtor does not pay a mechanic's lien, the debtor's property can be sold to satisfy the debt.
Answer the following statement true (T) or false (F)
Flawless Cosmetic Company manufactures and distributes several different products. The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour. Loren is the department manager of the Makeup Department that produces Products - Concealer (C) and Glow Cream (GC). Jennifer is the department manager of the Hair Care Department that manufactures Product - Shampoo (S). The product costs (per case of 24 bottles) and other information are as follows: Products CGCSDirect materials$100.00 $72.00 $48.00 Direct labor 42.00 31.50 12.00 Overhead 28.00 21.00 14.00 $170.00 $124.50 $74.00 Machine hours 4 2 3 Number of cases (per year) 300 500 600 If Flawless changes its allocation basis to machine hours,
what is the total product cost per case for Product GC? A. $117.15 B. $138.15 C. $144.00 D. $163.50
The advantage that correlation has over covariance is that the former has a set lower and upper limit
a. True b. False Indicate whether the statement is true or false