Eric Purchased a Building in 2005 That He Uses in His

question 37

Multiple Choice

Eric purchased a building in 2005 that he uses in his business.Eric uses the straight-line method for the building.Eric's original cost for the building is $420,000 and cost-recovery deductions are $120,000.Eric is in the top tax bracket and has never sold any other business assets.If the building is sold for $560,000,the tax results are

• A)$260,000 Sec.1231 gain,all taxable at 20%.
• B)$260,000 unrecaptured Sec.1250 gain,all taxable at 25%.
• C)$260,000 Sec.1231 gain,of which $120,000 is unrecaptured Sec.1250 gain taxable at 25% and the $140,000 balance is taxable at 20%.
• D)$120,000 Sec.1245 ordinary income,$140,000 Sec.1231 gain taxable at 20%.

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Definitions:

Fundamental Attribution Error

The tendency to underestimate the influence of external factors and overestimate the impact of internal factors when evaluating the actions of others.

Peripheral Route Persuasion

A method of persuasion that involves convincing someone indirectly, through superficial cues or associations, rather than through the central route which involves systematic thinking and argument analysis.

Strict Attendance

emphasizes the rigorous enforcement of rules requiring presence at a designated place, such as a school or workplace, within specified times.

Foot-In-The-Door Phenomenon

The psychological tactic of getting a person to agree to a large request by first setting them up to agree to a modest request.