Which of the Following Creates Potential § 1245 Depreciation Recapture

question 23

Multiple Choice

Which of the following creates potential § 1245 depreciation recapture and potential § 1231 gain?

• A)Depreciable equipment held more than one year and sold for more than its original cost.
• B)Amortizable goodwill held more than one year and disposed of for less than its adjusted basis.
• C)Land held more than one year and sold for more than was paid for it.
• D)Inventory held more than one year and sold for more than was paid for it.
• E)None of the above.

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Definitions:

Accounts Receivable

Money owed to a business by its customers for goods or services delivered but not yet paid for.

Accounts Payable

Liabilities of a business that represent amounts owed to creditors for goods and services received but not yet paid for.

Sunk Costs

Expenses that have already been incurred and cannot be recovered, which should not affect future business decisions.

Capital Budgeting

The process by which a business evaluates and selects long-term investments that are expected to yield returns over a period of time longer than one year.