Correct regarding the tax consequences of this transaction

Assignment Help Financial Management
Reference no: EM131322258

Wanda sells stock in Martin Corporation to her brother Willis for $1,800. She had purchased the stock four years ago for $3,000 and the current fair market value of the stock is $1,800. Willis paid her $1,800 for the stock. Which of the following statements is correct regarding the tax consequences of this transaction?

If Willis subsequently sells the stock to an unrelated party for $3,500, he will realize a gain of $1,700.

Wanda has a recognized loss of $1,200.

If Willis subsequently sells the stock to an unrelated party for $2,200, he will have no gain or loss.

If Willis subsequently sells the stock to an unrelated party for $3,500, he will have no gain or loss.

Reference no: EM131322258

Questions Cloud

What is the net effect on sampson income taxes : Sampson has three capital transactions during the current year: What is the net effect on Sampson's income taxes if he is in the 35% income tax bracket?
What are the tax consequences to andrea this year : On January 1, Andrea reviews her investment portfolio and finds out that she has had a very profitable year. To offset some of her gains, Andrea sells 100 shares of Big Bear Corporation for $10,000. She purchased those shares for $15,000 two years ea..
Adjusting his portfolio to meet his target asset allocation : Deuce has been adjusting his portfolio to meet his target asset allocation, and has realized several capital gains and losses this year. ST Trucking signed a $3.8 million contract. The contract calls for a payment of $1.1 million today, $1.3 million ..
Money in savings account at an annual rate : You have just received an endowment and placed this money in a savings account at an annual rate of 19.01 percent. You are going to withdraw the following cash flows for the next five years. End of year 1. $1406 2. $9693 3. $2460 4. $2265 5. $846 How..
Correct regarding the tax consequences of this transaction : Wanda sells stock in Martin Corporation to her brother Willis for $1,800. She had purchased the stock four years ago for $3,000 and the current fair market value of the stock is $1,800. Willis paid her $1,800 for the stock. Which of the following sta..
Dividend yield is defined : Dividend yield is defined as. 8 years from now you will be inheriting $100,000. What is the inheritance worth to you today if you can earn 7.25% interest compounded annually?
Regarding the tax consequences of selling the fountain : Hazel owns an event planning company that specializes in very high-end events. Several years ago, Hazel purchased a magnificent chocolate fountain for $3,000 and has since taken $1,200 in depreciation deductions on the fountain. Which of the followin..
What is the amount if you pay for the washing machine today : The local home improvement store has a washing machine on sale for $604, with a payment due in 1 year(s) from today. The store is willing to discount the price at an annual rate of 7 percent (compounded annually) if you pay today. What is the amount ..
Estimate what change in interest rate next year : Suppose that a bank has $10 billion of one-year loans and $30 billion of five year loans. These are financed by $35 billion of one-year deposits and $5 billion of five-year deposits. The bank has equity totaling $2 billion and its return on equity is..

Reviews

Write a Review

Financial Management Questions & Answers

  Hedging in the futures markets can reduce all risk

Hedging in the futures markets can reduce all risk if:

  Technical analysts and fundamental analysts

Technical analysts and fundamental analysts try to earn superior returns in the stock market. Explain how their efforts help keep the market efficient.

  What is the yield to maturity at current market price

YIELD TO MATURITY Harrimon Industries bonds have 6 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 10%. What is the yield to maturity at a current market price of (1) $865 and (2) $1,166? ..

  What is its self-supporting growth rate

Maggie's Muffins, Inc., generated $4,000,000 in sales during 2013, and its year-end total assets were $2,400,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, How large a sales increase can the..

  Explain intuitively why this method would be cost-effective

Under a strict command-and-control framework, suppose abatement standards are set equally across polluters. Assume the total abatement target is 30 units.  Now, refer directly to your model, and summarize what would happen qualitatively to the abatem..

  You are hired in the finance department at a large

you are hired in the finance department at a large metropolitan for-profit hospital. your duties are very important to

  Increase the length of time company will extend credit

Which one of the following will tend to increase the length of time a company will extend credit?

  Hat key element in sales approach is lacking

Grace is waiting in her office to meet Joseph, the new sales representative for Powerslam shoe company. Joseph arrives promptly and Grace notices he is well-dressed, sounds intelligent, and has a firm handshake. Joseph immediately inquires about what..

  What is the duration of bond if coupons are paid annually

Consider a bond with settlement date 12/12/2003. The maturity date of the bond is 11/15/2012. The coupon rate of the bond is 7% and the bond pays coupons semiannually. The bond is selling at a yield to maturity of 8%. Find the duration of the bond. W..

  Cause changes in short term real interest rates

How can changes in the federal funds rate, which is a short-term nominal interest rate, cause changes in short-term real interest rates?

  Firm has marginal tax rate-initial cash outflow

Delta Inc. is considering the purchase of a new machine which is expected to increase sales by $10,000 in addition to increasing non-depreciation expenses by $3,000 annually. The firm has a marginal tax rate of 34 percent, and its required rate of re..

  Fund starts making annual scholarship payments forever

April wants to create a scholarship fund by making annual savings donations to the fund for several years before the fund starts making annual scholarship payments forever. She plans to save 22,900 dollars per year in the trust fund for 5 years.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd