Kate Bought Residential Rental Property for $500,000

question 60

Multiple Choice

Kate bought residential rental property for $500,000. She reported a total of $100,000 of straight-line depreciation. Kate sells the building in 2014 for $425,000. What are the immediate tax consequences of the sale? Do not consider Kate's other transactions) . I. If Kate's rental activity is a production-of-income investment) activity, she will report a $25,000 long-term capital gain. II. If Kate's rental activity is a trade or business, she will report $25,000 of Unrecaptured Section 1250 gain.

• A) Only statement I is correct.
• B) Only statement II is correct.
• C) Both statements are correct.
• D) Neither statement is correct.

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