In 2005,Terry purchased land for $150,000.In 2014,Terry received $10,000 from a local cable television company in exchange for Terry allowing the company to run an underground cable across Terry's property.Terry is not required to recognize income from receiving the $10,000 because it was a return of his capital invested in the land.

Question

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Terry does not recognize income,but he must reduce his basis for the land by $10,000.The $10,000 received is a recovery of his capital.

In 2005,Terry Purchased Land for $150,000