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Sheena Maskell Sheena Maskell
wrote...
Posts: 1902
2 years ago
Clark sells an office building during the current year for $750,000. The building was purchased in 1985 for $350,000 and the accelerated depreciation taken amounted to $300,000. Straight-line depreciation would have been $200,000. Clark has never had any other Sec. 1231 transactions.
a.   What is the recognized gain or loss on the sale of the building and the character of the gain?
b.   How will the gain be taxed?
Textbook 

Prentice Hall's Federal Taxation: 2011: Individuals


Edition: 14th
Authors:
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MsLippyMsLippy
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Posts: 1848
2 years ago
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a.   Amount realized   $750,000
   Less: Adjusted basis ($350,000 - 300,000)       50,000
   Gain realized   $700,000
   1245 ordinary income   $300,000
   1231 Gain   $400,000

b.   The $300,000 1245 ordinary income is taxed at the taxpayer's marginal tax rate; the remaining 1231 gain is taxed as LTCG at a maximum of 15%.
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2 years ago
Thank you so much
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