Elise Sells a Painting That Has a Fair Market Value

Multiple Choice

Elise sells a painting that has a fair market value of $9,000 to Jon for $6,000. Which of the following statements about the tax effect of the sale is/are correct?
I.If Jon is an employee of Elise's, no income is recognized from the sale.
II.If Jon is Elise's brother, Jon does not recognize any income from the sale.
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A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.