A corporation sold a warehouse during the current year.The straight-line depreciation method was used.Information about the building is presented below: How much gain should the corporation report as section 1231 gain?
A)$124,000
B)$620,000
C)$586,000
D)$710,000

Question

A corporation sold a warehouse during the current year.The straight-line depreciation method was used.Information about the building is presented below:  How much gain should the corporation report as section 1231 gain?
A)$124,000 
B)$620,000 
C)$586,000 
D)$710,000

Quizplus · Accepted Answer

The corporation should report a section 1231 gain equal to the amount of the gain on the sale that is attributable to the building, which is calculated as follows:
Sale price                            $1,000,000
Less: adjusted basis            ($400,000)
Less: accumulated depreciation ($14,000 x 20) ($280,000)
Gain on sale                          $320,000
Since the building was used in a trade or business and held for over one year, this gain is treated as section 1231 gain. Therefore, the corporation should report a section 1231 gain of $320,000.

A Corporation Sold a Warehouse During the Current Year