Question

# Eighteen-year ACRS nonresidential real property owned by an individual has accumulated accelerated depreciation of \$975,000 at...

Eighteen-year ACRS nonresidential real property owned by an individual has accumulated accelerated depreciation of \$975,000 at January 1, of this year. This property is sold on January 1, this same year. The original cost of the property was \$975,000. The sale price was \$1,000,000.

66.     The amount of the realized and recognized gain is:

a.

a.       \$60,000

b.

b.       \$150,000

c.

c.       \$175,000

d.

d.       \$1,000,000

67. The character or nature of the gain realized and recognized is:

a.

a.       All ordinary gain

b.

b.       All capital gain

c.

c.       \$105,000 capital gain, \$70,000 ordinary income

d.

d.       \$25,000 capital gain, \$975,000 ordinary income

e.

e.       None of the above

68. If the property had been depreciated using the straight-line method, which of the answers to question 67 would now be correct?

 a. a.       All ordinary gain b. b.       All capital gain c. c.       \$105,000 capital gain, \$70,000 ordinary income d. d.       \$25,000 capital gain, \$975,000 ordinary income e. e.       None of the above

e.       None of the above

Solution 66 ) Amount of realized and recognized gain = Selling price - (cost of original asset - accumulated depreciation)

= \$1000000 - ( \$975000 - \$975000)

= \$1000000 - \$0

= \$1000000 ( answer) option d is correct

Solution 67) the character or nature of realized gain = all capital gain ( option b is the correct answer)

Solution 68) If property depreciated would be as per the straight-line method, even then the nature of realized gain will be all capital gain ( option b would be the correct answer)

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