Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?
A) $40,000 ordinary and $360,000 §1231 gain.
B) $200,000 ordinary and $200,000 §1231 gain.
C) $400,000 ordinary gain.
D) $400,000 capital gain.
E) None of these.

Question

Quizplus · Accepted Answer

The gain is calculated as the selling price ($800,000) minus the adjusted basis ($600,000 - $200,000 depreciation = $400,000), resulting in a $400,000 gain. Of this, $200,000 is recaptured as ordinary income under §1245 depreciation recapture rules, and the remaining $200,000 is a §1231 gain.

Bateman Corporation Sold an Office Building That It Used in Its