Alejandro Purchased a Building in 1985, Which He Uses in His

question 816

Multiple Choice

Alejandro purchased a building in 1985, which he uses in his manufacturing business. Alejandro used the ACRS statutory rates to determine the cost- recovery deduction for the building. Alejandro's original cost for the building is $500,000 and cost- recovery deductions allowed are $500,000. If the building is sold for $800,000, the tax results to Alejandro are

• A) $800,000 Sec. 1245 ordinary income.
• B) $500,000 Sec. 1245 ordinary income and $300,000 Sec. 1231 gain.
• C) $500,000 Sec. 1245 ordinary income and $300,000 Sec. 1250 income.
• D) $800,000 Sec. 1231 gain.

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Definitions:

Interest Rate

The cost of borrowing money or the return on investment, expressed as a percentage of the principal, over a specific time period.

Utility Function

A mathematical representation of how different bundles of goods or services provide varying levels of satisfaction or utility to a consumer.

Consumption

The action of using up a resource or goods in the process of fulfilling human needs or wants.

Income

Earnings received by an individual or entity, usually in the form of wages, salaries, or investments.