The Walford Partnership (owned by two individuals) sold an apartment building for $300,000 that it purchased for $280,000 ten years ago.The partnership took $80,000 of depreciation deductions on the building.What is the amount and type of gain realized by the partnership on the sale and taxed to the individual partners?

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Quizplus · Accepted Answer

The gain realized on the sale is calculated by subtracting the adjusted basis (original cost minus depreciation) from the sale price. The adjusted basis is $280,000 - $80,000 = $200,000. The sale price is $300,000, so the total gain is $300,000 - $200,000 = $100,000. Of this, $80,000 is Section 1250 unrecaptured gain, representing the depreciation recapture on real property, and the remaining $20,000 is Section 1231 gain, representing the profit over the original cost and depreciation recaptured.

The Walford Partnership (Owned by Two Individuals) Sold an Apartment