Jacqueline Dies While Owning a Building with a $1,000,000 FMV

question 111

Essay

Jacqueline dies while owning a building with a $1,000,000 FMV.The building is classified as Sec.1245 property acquired in 1985 for $850,000.Cost-recovery deductions of $850,000 have been claimed.Pam inherits the property.
a.What is the amount of Pam's basis in the property?
b.What is the amount of cost-recovery deductions that Pam must recover if she immediately sells the building?

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Definitions:

Variable Manufacturing Overhead

Refers to the production costs that change in proportion to the level of production activity, such as utilities or raw materials needed for manufacturing.

Machine-Hours

A measure of the amount of time a machine is operated in the production process, often used in costing and budgeting.

Predetermined Overhead Rate

A rate calculated before an accounting period begins, used to allocate manufacturing overhead to individual jobs or units based on a consistent measure, such as direct labor hours.

Direct Labor-Hours

The total hours worked by employees directly involved in the production process, often used as a basis for allocating costs to products.