The Purpose of Sec

question 77

True/False

The purpose of Sec.1245 is to eliminate the advantage taxpayers would have if they were able to reduce ordinary income by depreciation deductions and also receive favorable Sec.1231 treatment when the asset was sold.

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Definitions:

Variable Production Costs

Costs that fluctuate with the level of output production, such as raw materials and direct labor.

Variable Costing

An accounting method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in product costs.

Fixed Manufacturing Overhead

The set costs associated with producing goods that do not change with the level of output, including salaries, rent, and insurance.

Net Operating Income

A financial metric that shows the profitability of a company's core business activities, excluding the effects of financing and investment income.