Beige Corporation,a C corporation,purchases a warehouse on August 1,2001,for $1 million.Straight-line depreciation is taken in the amount of $411,750 before the property is sold on June 12,2017,for $1.2 million.What is the amount and character of the gain recognized by Beige on the sale of the realty?
A)Ordinary income of $0 and § 1231 gain of $611,750.
B)Ordinary income of $411,750 and § 1231 gain of $200,000.
C)Ordinary income of $82,350 and § 1231 gain of $529,400.
D)Ordinary income of $117,650 and § 1231 gain of $494,100.
E)None of the above.

Question

Quizplus · Accepted Answer

The first step is to calculate the adjusted basis of the property: 
$1,000,000 (original cost) - $411,750 (depreciation taken) = $588,250 (adjusted basis)

The selling price of the property is $1.2 million, which results in a realized gain of $611,750 ($1.2 million - $588,250).

Next, we need to determine the character of the gain. Since the property was held for more than one year, it would be classified as a § 1231 asset.

The amount of gain that qualifies as § 1231 gain is determined by netting all of the § 1231 gains and losses for the year. Let’s assume that Beige Corporation had a loss of $82,350 from the sale of another § 1231 asset during the year.

$611,750 (realized gain) - $82,350 (§ 1231 loss) = $529,400 (§ 1231 gain)

Therefore, the final answer is:
Choice: C
 Ordinary income of $82,350 and § 1231 gain of $529,400.

Beige Corporation,a C Corporation,purchases a Warehouse on August 1,2001,for $1