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CONCEPTS IN FED.TAX.,2020-W/ACCESS

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 63P

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Question

Company W sold services with a stand-alone fair value of $7,000 and equipment with a stand-alone fair
value of $25,000 to Company X. Further, Company W provided payment terms such that no amounts are
due for 366 days, at which time the full balance is due. The appropriate discount rate is 7%, which yields a
contract price of $29,907. What is the amount of the price to allocate to the services portion?
Answer:
23,364.84

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