Detroit Corporation sued Chicago Corporation for intentional damage to Detroit's goodwill. Detroit had created its goodwill through providing high-quality services to its customers. Thus, no basis for the goodwill appeared on Detroit's balance sheet. The suit was settled and Detroit received $1,500,000 for the damages to its goodwill. a. The $1,500,000 is not taxable because it represents a recovery of capital. b. The $1,500,000 is taxable because Detroit has no basis in the goodwill. c. The $1,500,000 is not taxable because Detroit did nothing to earn the money. d. The $1,500,000 is not taxable because Detroit settled the case. e. None of these.

Question

Kennedy Dunn

Business

15 March, 01:00

Detroit Corporation sued Chicago Corporation for intentional damage to Detroit's goodwill. Detroit had created its goodwill through providing high-quality services to its customers. Thus, no basis for the goodwill appeared on Detroit's balance sheet. The suit was settled and Detroit received $1,500,000 for the damages to its goodwill. a. The $1,500,000 is not taxable because it represents a recovery of capital. b. The $1,500,000 is taxable because Detroit has no basis in the goodwill. c. The $1,500,000 is not taxable because Detroit did nothing to earn the money. d. The $1,500,000 is not taxable because Detroit settled the case. e. None of these.

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Answers (1)

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Angelina Spears · Answer 1

d. The $1,500,000 is not taxable because Detroit settled the case

Explanation:

The $1,500,000 is not taxable because Detroit settled the case, Compensation received of damaging Goodwill is not taxable.