Albert's Sole Proprietorship Owns the Following Assets * Potential § 1245 Recapture of $45,000

question 90

Multiple Choice

Albert's sole proprietorship owns the following assets: $\begin{array}{lrr}&\text { Adjusted Basis }&\text { Fair Market Value }\\\text { Accounts receivable } & \$-0- & \$ 60,000 \\\text { Inventory } & 20,000 & 30,000 \\\text { Machinery and equipment* } & 50,000 & 90,000 \\\text { Buil dings** } & 120,000 & 170,000 \\\text { Land } & 80,000 & 140,000 \\& \$ \mathbf{2 7 0 , 0 0 0} & \$ 490,000\end{array}$ * Potential § 1245 recapture of $45,000. ** Straight-line depreciation was used.
Albert sells his sole proprietorship for $500,000. Calculate Albert's recognized gain or loss and classify it as capital or ordinary.

• A)$230,000 ordinary income.
• B)$230,000 capital gain.
• C)$115,000 ordinary income and $115,000 capital gain.
• D)$110,000 ordinary income and $120,000 capital gain.
• E)None of the above.

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Definitions:

Passionate Love

A state of intense longing for union with another, characterized by a high degree of physical attraction and emotional engagement.

Commitment

A state or quality of being dedicated to a cause, activity, or relationship, often implying a strong sense of loyalty and responsibility.

Consummate Love

A type of love defined by the presence of passion, intimacy, and commitment, often considered an ideal form of love in relationships.

Fatuous Love

A type of love in Sternberg's Triarchic Theory of Love, characterized by passion and commitment but lacking in intimacy.