Question

Explain three conditions with examples whereby a disposal is treated as a control transfer

Answer 1

Conditions where a disposal is treated as a control transfer:

Explanation:

A disposal occurs or takes place when a sale or transfer exist between two parties concerning a portion or all of the property. On the other hand, a control transfer is when some units or sections of a property or any item is is given to another owner through a transaction. There are conditions that can make a disposal qualify to be termed as a control transfer (Akalu, 2019). The conditions include-

1. A complete ownership is shifted from the initial holder of the disposed item or property to a new owner. For example, if John had a piece of land(which he received from Sheldon) and he gave it to Leonard for $10,000 then it will be treated as control transfer.
2. There exist a rivalry in the disposed item where one's consumption precludes the other's consumption. For example, if John and Mike have a shirt and John wears it on a particular day then it won't be available for Mike on that day at that time.
3. When the right to earn income from the disposed item or property is transferred to the new owner. For example, if Braun had a house which he had given for rent and he gives the house to Andrew then Andrew will have the right to receive the rent for the house.