Jenny, a real estate developer, identified piece of real estate owned by Porky that she would like
Question:
Jenny, a real estate developer, identified piece of real estate owned by Porky that she would like to develop. Before purchasing the property she needed to be sure this property would serve her purposes. So she performed market research and investigated the ability to rezone the property. This was going to take about 8 to accomplish. To prevent anybody else from purchasing the property prior to completing her due diligence, she secured an option on the property. The option cost 25.000, but it gave her the exclusive right to buy the property for the next 9 months. The option provides that Porky retains the 25.000 if the option is not exercised. However,if it is exercised, the $25,000 becomes part of the $1,000,000 contract price of the estate. After completing her due diligence, Jenny decide not to purchase the property. She allows the option to expire. What are consequences?
Check as many as are correct:
A- Porky has $25,000 of ordinary Income receipt of the option money
B- Porky has $25,000 ordinary income on the date the option expired
C- Jenny has $25,000 loss on the purchased the option
D- Jenny has capital loss of $25,000 when the option expired
E- None of the above
Business Statistics A First Course
ISBN: 978-0321979018
7th edition
Authors: David M. Levine, Kathryn A. Szabat, David F. Stephan