Final Answer:
In year 1, Maxim sold investment land with a tax basis of C) $1,000.
Step-by-step explanation:
The tax basis of an asset is the original value of the asset for tax purposes, and it is a crucial factor in determining the capital gain or loss when the asset is sold. In this scenario, Maxim sold investment land in year 1, and its tax basis is stated to be $1,000. The tax basis is the amount from which capital gains or losses are calculated, and it is essential for accurate tax reporting. In this case, Maxim's investment land has a tax basis of $1,000, which would be used to calculate any potential capital gains or losses upon the sale.
The tax basis is a key element in understanding the financial implications of selling an asset. If Maxim sold the investment land for more than its tax basis of $1,000, a capital gain would be realized. On the other hand, if Maxim sold the land for less than its tax basis, a capital loss would be incurred.
The tax basis is a critical factor in determining the taxable amount of the transaction. In summary, Maxim sold investment land in year 1 with a tax basis of $1,000, providing the foundational information needed for tax calculations and reporting associated with the sale of the asset.
Correct option is C) $1,000.