Question

Aqua Corporation purchases nonresidential real property on May 8, 2016, for $1,000,000. Straight-line cost recovery is taken in the amount of $89,765 before the property is sold on November 27, 2019, for $1,500,000. a. Compute the amount of Aqua's recognized gain on the sale of the realty. $ b. Determine the amount of the recognized gain that is treated as § 1231 gain and the amount that is treated as § 1250 recapture due to § 291. § 1231 gain: $ § 1250 recapture due to § 291:

Answer 1

Answer:

Explanation:

Sale Value                                                                               1500000

less:Adjusted basis (1000000-89765)                                    910235

a)Gain recognized                                                                     589765

b) in case of sale of real property,cooperates are subject to section 291 to recapture.According to section 291,cooperates taxpayers to recaptures 20% of the lessor of the gain recognized or accumulated depreciation taken.

The recaptured gain is taxed as ordinary gain.

The remaining gain is taxed as section 1231 gain.

Section 1231 Gain           (589765-17953)             571812

Section 1250 recapture due to section 291  (89765×20%)  17953