A Taxpayer Purchased a Factory Building in 1985 for $800,000

question 46

Multiple Choice

A taxpayer purchased a factory building in 1985 for $800,000.After claiming ACRS-accelerated depreciation of $800,000,she sells the asset for $1,000,000 during the current year.No payment is received during the current year,and the $1,000,000 balance to be paid with interest at the interest rate in four annual payments beginning one year from date of sale.The installment sales method is adopted.How much ordinary income is recognized in the current year?

• A)$0
• B)$200,000
• C)$800,000
• D)$1,000,000

---

Definitions:

Averaging

A strategy of reducing market risk in investment portfolios by consistently investing a fixed dollar amount over a period, regardless of the asset's price.

Securities

Assets signifying either an equity stake in a company listed on the stock market, a debt investment in a government entity or a business, or entitlement to ownership through an option.

Capital Structure

The mix of different forms of capital financing used by a company, including debt, equity, and other financial instruments.

Debt

Amount of money borrowed by one party from another, used by many corporations to grow beyond what they could from earnings alone.