A corporation sold a warehouse during the current year.The straight-line depreciation method was used.Information about the building is presented below: How much gain should the corporation report as section 1231 gain?

Question

A corporation sold a warehouse during the current year.The straight-line depreciation method was used.Information about the building is presented below:  How much gain should the corporation report as section 1231 gain?

Quizplus · Accepted Answer

To calculate section 1231 gain, we first need to calculate the adjusted basis of the warehouse. We can do this by subtracting accumulated depreciation from the original cost of the building:

$3,100,000 - $1,886,000 = $1,214,000 (adjusted basis)

Next, we need to calculate the amount of the gain on the sale of the building:

Sale price - adjusted basis = gain

$1,800,000 - $1,214,000 = $586,000

Therefore, the corporation should report $586,000 as section 1231 gain. The answer is C.

A Corporation Sold a Warehouse During the Current Year