A sole proprietorship purchased an asset for $1,000 in 2017 and its value was $1,500 at the end of 2017 . In 2018, the sole proprietorship sold the asset for $1,400 . The sole proprietorship realized a taxable gain of $400 in 2018 but an economic loss of $100 in 2018
a. True
b. False
Indicate whether the statement is true or false
True
RATIONALE: The realization requirement was not satisfied until 2018, and thus $400 in gross income was recognized in that year. Under the economic concept of income, the asset declined in value by $100 in 2018 and thus an economic loss was incurred in that year.
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