Question

Corgill Corporation sold land that it used for storing old equipment. Corgill owned the land for seven years and it had a basis of $234,000. Corgill received $50,000 cash and a note for $100,000 and the purchaser assumed Corgill’s $150,000 mortgage on the property. Corgill also paid a realtor’s fee of $15,000 and other selling expenses of $2,000.

1. What is Corgill’s Recognized gain or loss on the sale and what is its character?

B. If Corgill had held the land as an investment, how would your answer change?

Answer 1

A.
Cash	$     50,000.00
Notes Recivable	$ 1,00,000.00
Mortgage	$ 1,50,000.00
Less:
Realator's Fee	$    -15,000.00
Other Selling Expense	$      -2,000.00
Land Basis	$ -2,34,000.00
Gain Recongnized	$     49,000.00
Character :- Section 1231 gain
B.
The gain would be long-term capital gain If Corgill had held the land as an investment.