Question

A bargain purchase results when an employer transfers property to an employee at less than the property's fair market value or when a corporation transfers property to a shareholder at less than the property's fair market value.

A) True

B) False

Answer 1

A bargain purchase occurs when property is transferred at a price lower than its fair market value.

Step-by-step explanation:

A bargain purchase occurs when an employer transfers property to an employee or a corporation transfers property to a shareholder at a price that is lower than the fair market value of the property. This is considered a bargain because the recipient is getting the property at a discounted price.

For example, if an employer sells a piece of equipment to an employee for $500, but the fair market value of the equipment is $1,000, then this would be a bargain purchase.

Therefore, the statement is True.