Olivia wants to buy some vacant land for investment purposes. She cannot afford the full purchase price. Instead, Olivia pays thelandowner $12,300 to obtain an option to buy the land for $246,000 anytime in the next four years. Fourteen months after purchasingthe option, Olivia sells the option for $15,375. What is the amount and character of Olivia's gain or loss?She hasof $

Options are derivative contracts whose value is determined by the underlying asset. The option…

Answered: Olivia wants to buy some vacant land…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Clara received from her Aunt Sona property with a FMV at the date of the gift of $30,000. Aunt Sona purchased the property five years ago for $35,000. If Clara sold the property for $33,000, what is her gain or loss on the sale?
Marilyn owns land that she acquired three years ago as an investment for $250,000. She sells the land two years later for $300,000. How does the "recovery of capital doctrine" apply in computing Marylyn's gain or loss from the sales transaction? What is the correlation between "adjusted basis" and the "recovery of capital doctrine? Give an example how this doctrine prevents income from being taxes more than once.
Ringo owns 5 acres of rental property. Yoko rents the property to graze cows for one year and pays the rent with autographed copies of old records autographed by her late husband John. The lease called for rent of $10,000. How much income will Ringo recognize?
Sean sells land to Eli, his brother, for the fair market value of $39,000. Six months later when the land is worth $45,000, Eli sells the property to his son, Jon, without gift tax. His son sells the land for $47,000. Sean’s adjusted basis for the land is $24,000 what is Jon’s recognized gain or loss on the sales?
2
On Robin’s birthday, his grandmother gave him a ring that was worth $6,000 at the time of the gift. Robin’s grandmother had purchased the ring for $5,400. What is Robin’s basis in the ring if he sells it for $7,000? What if he sells it for $5,000? What if he sells it for $5,800? fill in the blank regardless of sales price
You have been notified by the family attorney that you are the sole heir to your lost uncle's estate. You have two options for receiving the inheritance: receive $500,000 at the end of each of the next 10 years or receive a lump sum payment of $2,500,000. Determine which is the better option.
Martha bought a home in 1988 at a cost of $100,000.00. She put 20% down and financed the remainder by way of a mortgage. She paid the mortgage off in 20 years. Over the years, she spent $45,000 improving and updating the house. Martha sold her home last year for $310,000.00 What was the value of Martha's equity in her home?
74 01:14:02 eBook For tax purposes, a dwelling unit is a residence if the taxpayer's number of personal-use days of the unit is more than 10 days. True or False True False
Alan Meer inherits a hotel from his grandmother, Mary, on February 11 of the current year. Mary bought the hotel for $730,000 three years ago. Mary deducted $27,000 of cost recovery on the hotel before her death. The fair market value of the hotel in February is $725,000. (Assume that the alternative valuation date is not used.) a) What is Alan’s adjusted basis in the hotel? b) If the fair market value of the hotel at the time of Mary’s death was $500,000, what is Alan’s basis?
Joe purchases a block of land in the western suburbs of Adelaide as an investment on 31 march 1988 for $50,000 incurring fees on purchase totaling $2,000. By 31 December 1988, he builds a house on the land costing $24,000. By 30 June 1990, he erects a large garage on the rear of the property costing $8,000. In May 2021, he decides to sell the investment property. On 1 June 2021 he enters in to contract to sell the property for $400,000 and receives payment on settlement on 31 July 2021, He incurs selling cost of $12,000 Calculate joe’s net capital gain for the financial year ending 30 June 2021 using both discounting and indexation methods if applicable. $152,000(discount method) and $236,224(indexation method) $152,000(discount method) and $272,448(indexation method) $76,000(discount method) and $272,448 (indexation method) $76,000(discount method) and $136,224(indexation method)
Clara received from her Aunt Sona property with a FMV at the date of the gift of $30,000. Aunt Sona purchased the property five years ago for $35,000 If Clara sold the property for $28,000, what is her gain or loss on the sale?

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