Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building 10 years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?
A)$40,000 ordinary and $360,000 §1231 gain.
B)$200,000 ordinary and $200,000 §1231 gain.
C)$400,000 ordinary gain.
D)$400,000 capital gain.
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

The gain is $400,000 ($800,000 - $600,000 - $200,000). The first $200,000 of gain is ordinary income because it is equal to the depreciation taken on the building. The remaining $200,000 of gain is §1231 gain.

Bateman Corporation Sold an Office Building That It Used in Its