Luke sold a building and the land on which the building sits to his wholly owned

Question

Luke sold a building and the land on which the building sits to his wholly owned corporation. Studemont Corp. at fair market value. The fair market value of the building was determined to be $407,500; Luke built the building several years ago at a cost of $325,000. Luke had claimed $65,000 of depreciation expense on the building. The fair market value of the land was determined to be $226,000 at the time of the sale; Luke purchased the land many years ago for $177,000. (Loss amounts should be indicated by a minus a. What is the amount and character of Luke's recognized gain or loss on the building? b. What is the amount and character of Luke's recognized gain or loss on the land?

Explanation / Answer

Answer

a.

b.

FMV -building        407,500 Cost-Building        325,000 Depreciation          65,000 FMV at time of sale-land        226,000 Land-Cost        177,000

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