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don mott was the sole proprietor of a high volume drug store which he owned for fift 625341

Don Mott was the sole proprietor of a high-volume drug store which he owned for fifteen years before he sold it to Dale Drug Stores, Inc. in 2007. Besides the $900,000 selling price for the store’s tangible assets and goodwill, Mott received a lump sum of $30,000 in 2007 for his agreement not to operate a competing enterprise within ten miles of the store’s location for a period of six years. The $30,000 will be taxed to Mott as

  1. $30,000 ordinary income in 2007.
  2. $30,000 short-term capital gain in 2007.
  3. $30,000 long-term capital gain in 2007.
  4. Ordinary income of $5,000 a year for six years.

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