Octet Corporation placed a small storage building in service 15 years ago.Octet's original cost for the building is $800,000 and the cost recovery deductions are $300,000.This year the building is sold for $1,100,000.The amount and character of the gain are
A)ordinary gain of $60,000 and Sec.1231 gain of $540,000.
B)ordinary gain of $300,000 and Sec.1231 gain of $300,000.
C)ordinary gain of $600,000.
D)Sec.1231 gain of $600,000.

Question

Quizplus · Accepted Answer

The gain is calculated as the selling price ($1,100,000) minus the adjusted basis ($800,000 - $300,000 = $500,000), resulting in a total gain of $600,000. The ordinary gain is the recapture of depreciation, which is $300,000, and the remaining $300,000 is a Sec.1231 gain.

Octet Corporation Placed a Small Storage Building in Service 15