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

To calculate the section 1231 gain, we need to compare the selling price with the adjusted basis of the asset. The adjusted basis is the original cost minus accumulated depreciation. Using the information given, the original cost of the building is $1,550,000, and assuming that the building was fully depreciated (since the straight-line depreciation method was used), the accumulated depreciation is also $1,550,000. Therefore, the adjusted basis is $0. The selling price of the building is $586,000, which means that the section 1231 gain is $586,000.

A Corporation Sold a Warehouse During the Current Year