Dontrell Sells a Building Used in His Business at a Gain

question 119

Multiple Choice

Dontrell sells a building used in his business at a gain of $20,000.The building was purchased in 2006,and $15,000 of depreciation had been deducted on the building to the date of sale.Dontrell's only other property transaction resulted in a $5,000 loss on the sale of equipment used in his business.Dontrell's marginal tax rate is 33% without considering these two transactions.As a result of these transactions
I.Dontrell will pay additional tax of $2,850.
II.Dontrell can only deduct $3,000 of the loss on the sale of the equipment and pays a tax of $3,750 on the sale of the building.
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• 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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Definitions:

Business Judgement Rule

A legal principle that protects corporate directors and officers when making business decisions, assuming they act in good faith and in the best interest of the corporation.

Officers

Individuals appointed by a company's board of directors who are responsible for managing the daily operations and executing the strategic plans of the corporation.

Directors

Individuals elected by shareholders to oversee and make policy decisions for a corporation, setting its strategic direction and ensuring governance.

Majority Vote

A decision-making process where the outcome is determined by more than half of the votes cast by a group.