Mr. and Mrs. Churchill operate a small business. This year, the Churchills sold a commercial office building used in their business for $1.5 million. They purchased the building in 1999 for a cost of $1.4 million and had deducted $538,000 MACRS depreciation through date of sale. The Churchills should characterize the $638,000 gain recognized on sale as:

Question

Quizplus · Accepted Answer

Since the property was used in the Churchills' business and held for more than one year, the gain should be classified as a Section 1231 gain. Since the amount of depreciation claimed ($538,000) is less than the amount of gain realized ($638,000), the entire gain should be classified as a Section 1231 gain.

Mr and Mrs