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Yariv is employed by a company, GreenCar, that sells environmentally-friendly cars. Yariv loves driving (and the environment), and has considered purchasing his own GreenCar for some time. The cars sell on the retail market for $40,000 each, and cost GreenCar $25,000 each to manufacture.

GreenCar agrees to sell Yariv a car at a discount, and to allow him to pay for it in installments of $8,000 a year, for four years. Yariv purchases the car.

After three years, Yariv decides to leave GreenCar. (He has paid $24,000 for the car by the time he leaves.) Recognizing that Yariv has been a loyal employee, GreenCar waives the need for Yariv to pay the last installment.

Yariv, having decided to give up driving altogether, sells the car to Marie, his sister, for $20,000.

What are the tax consequences for Yariv and GreenCar? Make sure to include statutory or case authority to support your answer.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M938933

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