Bateman Corporation sold an office building that it used in its business for $800,250. Bateman bought the building 10 years ago for $599,875 and has claimed $200,375 of depreciation expense. What is the amount and character of Bateman's gain or loss?
A) $40,075 ordinary and $360,675 §1231 gain.
B) $200,375 ordinary and $200,375 §1231 gain.
C) $400,750 ordinary gain.
D) $400,750 capital gain.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

The gain is calculated as the selling price ($800,250) minus the adjusted basis (original cost $599,875 - depreciation $200,375 = $399,500), resulting in a gain of $400,750. The $200,375 of depreciation is recaptured as ordinary income under §1245, and the remaining $200,375 is a §1231 gain.

Bateman Corporation Sold an Office Building That It Used in Its