Question

Detroit Corporation sued Chicago Corporation for intentional damage to Detroit's goodwill. Detroit had created its goodwill through providing high-quality services to its customers. Thus, no basis for the goodwill appeared on Detroit's balance sheet. The suit was settled and Detroit received $1,500,000 for the damages to its goodwill.a. The $1,500,000 is not taxable because it represents a recovery of capital.b. The $1,500,000 is taxable because Detroit has no basis in the goodwill.c. The $1,500,000 is not taxable because Detroit did nothing to earn the money.d. The $1,500,000 is not taxable because Detroit settled the case.e. None of these.

Answer 1

Answer:

d. The $1,500,000 is not taxable because Detroit settled the case

Explanation:

The $1,500,000 is not taxable because Detroit settled the case, Compensation received of damaging Goodwill is not taxable.