Question

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

Answer 1

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)