JTF, Inc. a C corporation bought a building several years ago to use as a wareho
ID: 2535809 • Letter: J
Question
JTF, Inc. a C corporation bought a building several years ago to use as a warehouse in its business. It paid $20,000 in cash and assumed a $180,000 debt from the seller in connection with the purchase. Over the years, JTF correctly deducted $30,000 in straight line depreciation from the date the property was purchased through the date of sale. JTF sold the warehouse in the current year. The buyer paid JTF $50,000 in cash, took the property subject to the $180,000 debt, and also provided moving services to Taxpayer worth $7,000. Part 1) What portion of JTF, Inc.’s recognized gain or loss on the sale of the warehouse will be ordinary? Part 2) What if it was a piece of equipment used for the business?
A. $0
B. $6,000
C. $7,000
D. $30,000
E. $37,000
F. $67,000
G.None of the above
Explanation / Answer
) Orrdinary gain/loss to be recognized is F. $67000 as the liabilities assumed are same $180000, the diffference in cash is $30000 apart from that JTF has claimed a depreciation of $30000 over the years and hence the book value of the property is less than $30000 now and the value of services provided to the taxpayers is $7000.
So, the gain to be recognized is $30000 + $30000 + $7000 = $67000
2) If it was an equipment used for the business then also the treatment would have been the same.
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