Consider three office buildings placed in service as shown below and answer the following true-false questions. Assume all assets are sold by a noncorporate taxpayer at a gain and there are no other sales or exchanges or nonrecaptured Sec. 1231 loss unless told otherwise. None of the buildings are fully depreciated when sold and the taxpayer’s tax rate is more than 25%.
Placed in Service
Building #1 ………………..Before 1981
Building #2 ………………..After 1980 and before 1987
Building #3 ………………..After 1986
1. Some or all of the gain on sale of #1 is ordinary if accelerated depreciation was used.
2. If the straight-line method of depreciation was used for #1, some or all of the gain may be taxed at 25%.
3. Gain on the sale of #2 could be Sec. 1245 ordinary income.
4. Gain on the sale of #2 could be Sec. 1231 gain.
5. Part of the gain on the sale of #2 could be Sec. 1245 ordinary income and part could be Sec. 1231 gain.
6. If the straight-line method of depreciation was used for #2, some or all of the gain may be taxed at 25%.
7. Some or all of the gain on the sale of #3 could be Sec. 1245 ordinary income.
8. Some or all of the gain on the sale of #3 could be taxed at 25%.
9. Some of the gain on the sale of #3 could be Sec. 1250 ordinary income.
10. If the taxpayer has a nonrecaptured Sec. 1231 loss of $30,000 and the gain on the sale of #3 is $40,000, all $40,000 of the gain is taxed as ordinary income.