Kristine Owns All of the Stock of a C Corporation

question 20

Multiple Choice

Kristine owns all of the stock of a C corporation which owns the following assets: * Potential § 1245 recapture of $45,000.
** Straight-line depreciation was used.
Her adjusted basis for her stock is $270,000.Calculate Kristine's recognized gain or loss and classify it as capital or ordinary if she sells her stock for $500,000.

• A)$230,000 ordinary income.
• B)$230,000 capital gain.
• C)$115,000 ordinary income and $115,000 capital gain.
• D)$110,000 ordinary income and $120,000 capital gain.
• E)None of the above.

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Definitions:

Lessor's Tax Rate

The tax rate applicable to a lessor, the entity that leases out a property or asset, on the income generated from the lease.

Borrowing Increases

The act of increasing the amount of money borrowed, which typically leads to higher debt levels and potentially increased interest expenses.

Purchase Price

The amount paid to buy a good, service, or financial asset.

Off-Balance Sheet Lease Financing

Off-balance sheet lease financing involves leasing arrangements that are not recorded on a company's balance sheet, potentially making a company's financial condition appear stronger than it actually is.