31) 31) Octet Corporation placed a small storage building in service 15 years ago. Octet's original cost for the building is $800,000 and the cost recovery deductions are $300,000. This year the building is sold for $1,100,000. The amount and character of the gain are A) ordinary gain of $600,000 B) ordinary gain of $60,000 and Sec. 1231 gain of $540,000. C) ordinary gain of $300,000 and Sec. 1231 gain of $300,000. D) Sec. 1231 gain of $600,000. 32) 32) Cobra Inc. sold stock for a $25,000 loss five years ago. It has been carrying over the capital loss for five years, and the loss will expire at the end of this year because Cobra has not had any capital gains. Earlier this year Cobra sold a parcel of land held four years for business use and will recognize a $30,000 gain. Cobra is thinking about selling some machinery used in its business for the past three years. During this time technology has dramatically changed so Cobra will recognize a $32,000 loss on the sale of the machinery. Cobra is trying to decide whether to sell the machinery at year-end or early next year. Cobra is profitable and has a consistent marginal tax rate of 21%. When should Cobra sell the equipment? A) early next year B) current year C) current year, but arrange an installment sale to spread the loss recognition over the two years D) either the current year or next year 33) 33) A corporation owns many acres of timber, which it acquired three years ago, and which has a $120,000 basis. The timber was cut last year for use in the corporation's business. The FMV of the timber on the first day of last year was $270,000. The corporation made the appropriate election to treat the cutting as a sale or exchange. The timber is sold for $300,000 this year. The tax result this year is A) recognition of Sec. 1231 gain of $30,000. B) no income recognized since all recognition occurs in the year of the cutting of the timber. C) recognition of capital gain of $30,000 D) recognition of ordinary income of $30,000. 34) 34) When depreciating 5-year property, the final year of depreciation will be year A) 3. B) 4. C) 5. D) 6. 35) 35) In calculating depletion of natural resources each period A) the smaller of cost depletion or percentage depletion must be used. B) cost depletion must be used. C) the greater of cost depletion or percentage depletion must be used. D) percentage depletion must be used. 36) 36) Sophie owns an unincorporated manufacturing business. In 2021, she purchases and places in Service $2,627,000 of qualifying five-year equipment for use in her business. Her taxable income from the business before any Sec. 179 deduction is $940,000. Sophie elects to expense the maximum under Sec. 179 and does not apply bonus depreciation. What is Sophie's maximum total cost recovery deduction for 2021? A) $1,256,800 B) $1,043,000 C) $1,277,400 D) $940,000
