A corporation owns an office building and land. The office building and land wer

Question

A corporation owns an office building and land. The office building and land were acquired in 1978 for $ 1,400,000 and $ 500,000, respectively. During the current year, the properties are sold for $ 1,900,000 with 35% of the selling price being allocated to the land. The assets as shown on the coporation's books before their sale are as follows:

Building:                   1,400,000

Accum. Depreciation: 1,280,000 (a)        120,000

Land:                                                    500,000

(a) If straight line method of depreciation had been used, the accumulated depreciation would be 1,200,000

Requirements

a. What is the recognized gain due to the sale of the building? (1,115,000)

b. What is the character of the recognized gain due to the sale of the building?

"Of the recognized gain from Part a, ???? is Sec. 1250 ordinary income and ???? is Sec. 1231 gain. Show calculation for this?

c. What is the recognized gain and character of the gain due to the sale of the land? (165,000)

Explanation / Answer

As I see you have doubt on part b only

b) It will be treated as section 1231 Property because it is held for more than one year.

Any gain or loss resulting from the sale or disposition of depreciable property used in trade or business and held one year or more is considered section 1231 Property i.e Capital gains

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