Hammond Inc

question 60

Multiple Choice

Hammond Inc.,sells a building that it purchased in 1993 for $1,500,000.The building cost $1,000,000 and had an adjusted basis of $700,000 at the date of the sale.
I.Hammond has an $800,000 Section 1231 gain on the sale.
II.Hammond must report $300,000 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:

Interest Bearing

A term indicating that a financial instrument or account accrues interest over time, such as a loan, bond, or savings account.

Note Payable

A written promise to pay a certain amount of money on a specific future date, representing a liability for the issuer.

Account Payable

A liability represented by an obligation to pay off a short-term debt to its creditors or suppliers.

Notes Payable

An accounting term for amounts owed by a business that are evidenced by promissory notes.