Bright Corporation purchased residential real estate five years ago for $450,000, of which $50,000 was allocated to the land and $400,000 was allocated to the building. Bright booked straight-line MACRS deductions of $55,000 during the past five years. This year, Bright sells the property for $550,000, of which $100,000 is allocated to the land and $450,000 is allocated to the building. What is
the amount and character of Bright's recognized gain or loss on the sale?
What will be an ideal response?
Bright recognizes $50,000 ($100,000 - $50,000) of Sec. 1231 gain on the sale of the land. Bright also recognizes $105,000 [$450,000 - ($400,000 - $55,000)] on the sale of the building, of which $11,000 (20% of the lesser of (1) $55,000 depreciation claimed, or (2) $105,000 gain recognized) is ordinary income recaptured under Sec. 291. The remaining $94,000 ($105,000 - $11,000) gain on the sale of the building is a Sec. 1231 gain.
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What will be an ideal response?
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Using numbers when possible eliminates potential confusion with international audiences because dates and amounts are conveyed in the same way throughout the world
Indicate whether the statement is true or false