MrAnd MrsMarley Operate a Small Business

question 62

Multiple Choice

Mr.and Mrs.Marley operate a small business.This year,the Marleys sold a commercial office building used in their business for $1.1 million.They purchased the building in 2005 for a cost of $900,000 and have deducted $300,000 MACRS depreciation through date of sale.The Marleys should characterize the $500,000 gain recognized on sale as:

• A)Capital gain
• B)Section 1231 gain
• C)$300,000 ordinary gain and $200,000 Section 1231 gain
• D)None of the above

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Definitions:

Owner's Capital

The total equity or net worth owned by the proprietor of a company, reflecting the amount invested plus any retained earnings.