Eric Purchased a Building in 2008 That He Uses in His

question 48

Multiple Choice

Eric purchased a building in 2008 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:

Critical-Thinking Guidelines

A set of principles aimed at encouraging individuals to rigorously question and evaluate ideas logically before accepting them as true.

Emotional Reasoning

A cognitive process where a person believes something to be true based solely on their feelings, rather than facts or evidence.

Examine The Evidence

The process of carefully reviewing and analyzing information or data to draw conclusions or make decisions.

Argument By Anecdote

A logical fallacy where a general conclusion is drawn from a few personal stories or isolated examples, rather than from systematic analysis.