Question
1- Ben purchased an apartment building about 10 years ago, for $200,000. The building has been depreciated over the appropriate recovery period using the straight-line
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Ben purchased an apartment building about 10 years ago, for $200,000. The building has been depreciated over the appropriate recovery period using the straight-line method. In the current year, the building was sold for $220,000, when the accumulated depreciation was $62,500. Ben is in the highest tax bracket; on his current year tax return, he should report:
a.Section 1231 gain of $20,000 and ordinary income of $62,500
b.Section 1231 gain of $62,500 and ordinary income of $20,000
c.Ordinary income of $82,500
d.Section 1231 gain of $20,000 and "unrecaptured depreciation" taxed at 25 percent of $62,500
e.None of these choices are correct.
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Calculator
An asset's adjusted basis is computed as:
a.Original basis + capital improvements + gain or loss realized.
b.Original basis - capital improvements + accumulated depreciation.
c.Original basis + capital improvements - accumulated depreciation.
d.Original basis + capital improvements + accumulated depreciation.
e.None of these choices are correct.
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Section 197 intangibles:
a.Include goodwill, going-concern value, and information bases.
b.Are not amortized over the actual estimated useful life of the intangible asset.
c.Are amortized over a 15-year period.
d.Were defined in the Revenue Reconciliation Act of 1993.
e.All of these choices are true.
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