Potter Corp. and Sly Corp. file consolidated tax returns. In January 2006, Potter sold land, with a basis of $60,000 and a fair value of $100,000, to Sly for $100,000. Sly sold the land in June 2007 for $125,000. In its 2007 and 2006 tax returns, what amount of gain should be reported for these transactions in the consolidated return?
|
2007 |
2006 |
|
|
a. |
$25,000 |
$40,000 |
|
b. |
$25,000 |
$0 |
|
c. |
$40,000 |
$25,000 |
|
d. |
$65,000 |
$0 |