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:

Corporation

A legal entity recognized by law, distinct from its owners, with rights to own property, sue or be sued.

Accounting System

A structured process used to collect, record, classify, summarize, and interpret financial information for decision making.

Classifies

To arrange or categorize entities based on shared characteristics or criteria.

Transactions

The exchange or transfer of goods, services, or funds between two or more parties, recorded in the financial records of the entities involved.