Question
Devon owns 40% of the Agate Company for which his basis is $100,000. He sells one-half of his ownership interest to Bernice for $80,000. Which
Devon owns 40% of the Agate Company for which his basis is $100,000. He sells one-half of his ownership interest to Bernice for $80,000. Which of the following statements is correct?
a.If Agate is an S corporation, Devon has a recognized gain of $30,000, some of which may be capital and some of which may be ordinary income.
b.If Agate is a partnership, Devon has a recognized capital gain of $30,000.
c.If Agate is a C corporation, Devon has a recognized capital gain of $30,000.
d.Only "If Agate is a C corporation, Devon has a recognized capital gain of $30,000" and "If Agate is a partnership, Devon has a recognized capital gain of $30,000" are correct.
e."If Agate is an S corporation, Devon has a recognized gain of $30,000, some of which may be capital and some of which may be ordinary income", "If Agate is a C corporation, Devon has a recognized capital gain of $30,000", and "If Agate is a partnership, Devon has a recognized capital gain of $30,000" are correct.
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