help in homework

New User?

Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / Aqua Corporation purchases nonresidential real property on May 8, 2017 for $1,650,000

Aqua Corporation purchases nonresidential real property on May 8, 2017 for $1,650,000

Accounting

Aqua Corporation purchases nonresidential real property on May 8, 2017 for $1,650,000. Straight line cost recovery is taken in the amount of $165,000 before the property is sold on November 27, 2020, for $2.475,000 3. Compute the amount of Aqua's recognized gain on the sale of the realty b. Determine the amount of the recognized gain that is treated as $ 1231 gain and the amount that is treated as 1250 recapture (ordinary Income due to s 291) $1231 gali $1250 recapture ordinary income due to 5 291)

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

a.

Basis $1,650,000
Less: Cost recovery ($165,000)
Adjusted basis $1,485,000

Computation of gain on sale

sale value $2,475,000
Less: Adjusted basis ($1,485,000)
Gain on the sale $990,000

Therefore, the amount of gain recognized on the sale of realty is $990,000

b.

In case of Real property corporate are subject to section 291 recapture, according to section 291 corporate taxpayer to recapture 20% of the lessor of gain recognized.

The recapture gain is treated as Ordinary gain, The remaining gain is taxed as section 1231 gain

>calculation of section 1231 gain

Gain recognized on sale $990,000
Less: recapture i.e 20% of cost recovery (20% x $165,000) ($33,000)
Gain of section 1231 $957,000

>calculation of Section 1250 recapture due to section 291 gain

20% of cost recovery = 20% x $165,000 = $33,000

Therefore Gain on Section 1250 recapture due to section 291 is $33,000

Sitejabber (5.0)

BBC (5.0)

Trustpilot (4.9)

Google (5.0)

Related Questions