Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

4) Frankie owns an office building in Cleveland (Section 1231/1250 property) He originally purchased the building for $600,000 and deducted straight-line depreciation deductions of $200,000.

image text in transcribed
4) Frankie owns an office building in Cleveland (Section 1231/1250 property) He originally purchased the building for $600,000 and deducted straight-line depreciation deductions of $200,000. What are the tax consequences if he sells the building for $1,000,000 ? (He is in the highest tax bracket for capital gains and ordinary income) a. He will have ordinary income of $0. b. He will have $200,000 of any gain taxed at 25%. c. He will have 1231 gains (taxed at 20% ) of $400,000 d. All of the above 5) Sally owns a personal fitness center that specializing in training young people interested in earning college scholarships. A handful of years ago, she purchased a weight machine (1231/1245) for $5,000 and has since taken $1,000 in depreciation deductions. She is now ready to replace the weight machine with a more current model but is not sure what the tax consequences of selling the old weight machine will be. Which of the following statements regarding the tax consequences of selling the old machine is true? a. If Sally sells the old weight machine for $4,000, she will have a $600 capital loss b. If Sally sells the old weight machine for $3,800, she will have a $600 ordinary income c. If Sally sells the old weight machine for $4,200, she will have a $200 ordinary income d. If Sally sells the old weight machine for $4,800, she will have a $800 capital gain 6) Bryan owns an apartment building (1231/1250). Real estate prices in the area have been rising and he thinks he could make a profit by selling the building. He originally purchased the building for $1,200,000 and took depreciation deductions of $700,000. Straight-line depreciation would have been $500,000. What are the tax consequences if he sells the building for $3,500,000 ? a. He will have ordinary income of $200,000 b. He will have $700,000 of unrecaptured Section 1250 gain c. He will have capital gains of $3,000,000 d. None of the above

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started