Mountainview Corporation Sells Depreciable Residential Real Estate for $525,000

question 95

Multiple Choice

Mountainview Corporation sells depreciable residential real estate for $525,000. The property cost $675,000, and $200,000 of accelerated depreciation was deducted on the property. Allowable straight-line depreciation for the same period would have been $180,000. Which of the following correctly states the character of the gain from the sale of the property?

• A)$ 50,000 ordinary gain.
• B)$ 50,000 Section 1231 gain.
• C)$ 30,000 Section 1231 gain and $20,000 Section 1250 ordinary income.
• D)$ 20,000 Section 1231 gain and $30,000 Section 1250 ordinary income.
• E)$150,000 Section 1231 gain and $20,000 Section 1250 ordinary gain.

---

Definitions:

Inelastic Demand

Product or resource demand for which the price elasticity of demand is less than 1, so that any given percentage change in price leads to a smaller percentage change in quantity demanded. As a result, quantity demanded is relatively insensitive to (inelastic with respect to) price.

Financial Aid

Financial support provided to individuals to help cover the costs of education or other personal expenses.

Price Elastic

Describes how sensitive the demand for a good is to changes in its price; highly elastic demand means consumers will significantly reduce buying with small price increases.

Price Inelastic

Describes a situation where the demand for a good is not very responsive to price changes, meaning consumers buy roughly the same amount regardless of price fluctuations.