Ross purchased a building in 1985, which he uses in his manufacturing business. Ross used the ACRS statutory rates to determine the cost- recovery deduction for the building. Ross's original cost for the building is $500,000 and cost- recovery deductions allowed are $500,000. If the building is sold for $340,000, the tax results to Ross are

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The building is depreciated using the ACRS method, which means that it is considered to be a 15-year property. As a result, the cost-recovery deductions allowed are $500,000. When the building is sold for $340,000, Ross has a gain of $340,000. This gain is considered to be Sec. 1245 ordinary income because the building is considered to be a depreciable property.

Ross Purchased a Building in 1985, Which He Uses in His