William buys land for $40,000 cash. Ten years later, when the land has dropped in value to $30,000, William sells it to his wife

Question

AleksAgata [21]

2 years ago

14

William buys land for $40,000 cash. Ten years later, when the land has dropped in value to $30,000, William sells it to his wife

Susan at its fair market value, $30,000. What are the income tax consequences to William of the sale to his wife

Business

1 answer:

olga_2 [115] · Answer 1 · 2023-05-05T10:50:14+03:00

The income tax consequences to William on the sale is that he realizes loss in the amount of $10,000 but does not recognize that loss.

Realized loss = Purchase cost - Sales cost

Realized loss = $40,000 - $30,000

Realized loss = $10,000

Hence, the income tax consequences to William on the sale is that he realizes loss in the amount of $10,000 but does not recognize that loss.

Therefore, the Option A is correct.

Missing options includes <em>"William realizes and recognizes loss in the amount of $10,000. William realizes and recognizes zero gain or loss. William realizes loss in the amount of $10,000 but does not recognize that loss. None of the above."</em>

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