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?
A)$124,000
B)$620,000
C)$586,000
D)$710,000

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?
A)$124,000 
B)$620,000 
C)$586,000 
D)$710,000

Quizplus · Accepted Answer

To calculate the gain, we need to subtract the adjusted basis of the building from the sale price. The adjusted basis can be calculated by subtracting the total depreciation taken from the original cost.

Adjusted basis = Original cost - Total depreciation taken
= $2,500,000 - $1,914,000
= $586,000

Section 1231 gain is calculated by subtracting any losses from the sale of business assets from any gains. Since there is no information provided about any losses, we can assume there are none. Therefore, the gain to be reported as section 1231 gain is $586,000. Option C is the correct answer.

A Corporation Sold a Warehouse During the Current Year