In 1980,Artima Corporation purchased an office building for $400,000 for use in its business.The building is sold during the current year for $550,000.Total depreciation allowed for the building was $390,000;straight-line would have been $360,000.As result of the sale,how much section 1231 gain will Artima Corporation report?
A)$150,000
B)$398,000
C)$510,000
D)$540,000

Question

Quizplus · Accepted Answer

To determine the section 1231 gain, we need to calculate the adjusted basis of the building first.

Adjusted basis = Original cost - accumulated depreciation
Adjusted basis = $400,000 - $390,000
Adjusted basis = $10,000

Next, we need to compare the selling price of the building to the adjusted basis. Since the selling price is higher than the adjusted basis, we have a gain.

Gain = Selling price - adjusted basis
Gain = $550,000 - $10,000
Gain = $540,000

Since this is a section 1231 asset, we need to look at the net section 1231 gain or loss for the year. This is calculated by adding up all section 1231 gains and losses for the year. Let's assume that Artima Corporation had no other section 1231 gains or losses for the year.

Net section 1231 gain = $540,000

Therefore, the correct answer is B) $398,000.

In 1980,Artima Corporation Purchased an Office Building for $400,000 for Use