Taxpayer T built
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Taxpayer T built a house using materials which cost T $100,000. Immediately upon completion in 2020, the house was appraised at $250,000 fair market value. T immediately gifted the house to T's son S. S lived in the house for 2 years and in 2022, S exchanged the house for shares of Exxon Mobil stock worth $200,000. S sold the Exxon stock for $210,000 cash in 2023. Which of the following is a correct statement?
a. T will recognize a gain of $150,000 in 2020
b. S will recognize a gain of $10,000 in 2023
c. S will not recognize gain or loss upon the exchange in 2022
d. S will recognize a loss of $50,000 in 2022
e. None of a through d is correct
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