Hurst Company Purchased an Apartment Building in 1986 for $700,000

question 119

Multiple Choice

Hurst Company purchased an apartment building in 1986 for $700,000. The building is sold in 2018 for $900,000. The actual depreciation deducted on the building as of the sale date was $600,000. Straight-line depreciation for the same period would have been $400,000. What is the amount and character of the gain recognized on the sale?

• A)$900,000 Section 1231 gain.
• B)$200,000 ordinary income, and $100,000 Section 1231 gain.
• C)$400,000 ordinary income, and $400,000 Section 1231 gain.
• D)$200,000 ordinary income, and $400,000 long-term capital gain.
• E)$200,000 ordinary income, and $600,000 Section 1231 gain.

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Definitions:

Property Taxes

Taxes assessed on real estate by local government, based on the property's value.

Contribution Margin

The amount remaining from sales revenue after all variable expenses have been deducted.

Photo-prints

Photographic images produced on paper or other substrates from digital or film originals.

Industrial Photo-finishing

Refers to the commercial process of developing and printing photographic images on a large scale, typically for businesses.