Kate Bought Residential Rental Property for $500,000

question 54

Multiple Choice

Kate bought residential rental property for $500,000.She reported a total of $100,000 of straight-line depreciation.Kate sells the building in 2013 for $425,000.What are the immediate tax consequences of the sale? (Do not consider Kate's other transactions) .
I.If Kate's rental activity is a production-of-income (investment) activity,she will report a $25,000 long-term capital gain.
II.If Kate's rental activity is a trade or business,she will report $25,000 of Unrecaptured Section 1250 gain.

• 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:

Movement

The act or process of moving, particularly of the human body or parts thereof.

Allows

To permit or give permission for something to happen.

Permits

Authorizations or licenses granted by an authority to carry out specific actions.

Flexion

The action of bending a limb or joint, reducing the angle between the bones of the limb at the joint.