Eric Purchased a Building in 2006 That He Uses in His

question 47

Multiple Choice

Eric purchased a building in 2006 that he uses in his business.Eric uses the straight-line method for the building.Eric's original cost for the building is $420,000 and cost-recovery deductions are $120,000.Eric is in the top tax bracket and has never sold any other business assets.If the building is sold for $560,000,the tax results are

• A)$260,000 Sec.1231 gain,all taxable at 20%.
• B)$260,000 unrecaptured Sec.1250 gain,all taxable at 25%.
• C)$260,000 Sec.1231 gain,of which $120,000 is unrecaptured Sec.1250 gain taxable at 25% and the $140,000 balance is taxable at 20%.
• D)$120,000 Sec.1245 ordinary income,$140,000 Sec.1231 gain taxable at 20%.

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Definitions:

Informed Decisions

Choices made based on a thorough understanding of the advantages, disadvantages, and potential outcomes of different options.

Conflict Theory

Conflict theory is a sociological perspective that emphasizes the role of competition and conflict between social groups over resources and power, shaping society's structure.

Have-nots

Individuals or groups who are perceived as disadvantaged, particularly in terms of economic or social resources.

Structural-functional Theory

A viewpoint in sociology that considers society as an intricate system in which its components cooperate to foster unity and steadiness.