Question

Beige Corporation, a C corporation, purchases a warehouse on August 1, 2004, for $1,000,000. Straight-line depreciation is taken in the amount of $411,750 before the property is sold on June 12, 2020, for $1,200,000. What is the amount and character of the gain recognized by Beige on the sale of the realty

Answer 1

Answer:

realized Section 1231 gain = $611,750

Explanation:

book value before the sale is made = $1,000,000 - $411,750 =$588,250

realized Section 1231 gain = selling price - book value = $1,200,000 - $588,250 = $611,750

A Section 1231 gain is realized when a real estate property is sold after the company has held it for more than 1 year.