Alejandro purchased a building in 1985,which he uses in his manufacturing business.Alejandro uses the ACRS statutory rates to determine the cost-recovery deduction for the building.Alejandro's original cost for the building is $500,000 and cost-recovery deductions allowed are $500,000.If the building is sold for $800,000,the tax results to Alejandro are
A)$500,000 Sec.1245 ordinary income and $300,000 Sec.1231 gain.
B)$800,000 Sec.1245 ordinary income.
C)$500,000 Sec.1245 ordinary income and $300,000 Sec.1250 income.
D)$800,000 Sec.1231 gain.

Question

Quizplus · Accepted Answer

A)Section 1245 ordinary income recapture applies to non-residential real estate placed in service after December 31,1980,and before January 1,1987.This property qualifies as such.Gain realized is considered 1245 ordinary income to the extent of all depreciation taken,with any remaining gain treated as Sec.1231 gain.
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Alejandro Purchased a Building in 1985,which He Uses in His