Question

Calculator Exercise 17-20 Algorithmic) (LO. 1) Aqua Corporation purchases nonresidential real property on May 8, 2016, for $2,930,000. Straight-line cost recovery is taken in the amount of $293,000 before the property is sold on November 27, 2019, for $4,395,000 a. 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 5 1231 gain and the amount that is treated as $ 1250 recapture due to $ 291 $ 1231 gain: s $ 1250 recapture due to $ 291: $

Answer 1

Information Given -

Aqua Corporation purchases nonresidential real property on May 8, 2016, for $2930000.

Straight-line cost recovery is taken in the amount of $293000 before the property is sold on November 27, 2019, for $4395000.

.

(a) -- Compute the amount of Aqua's recognized gain on the sale of the realty.

Answer -

Gain recognized on the sale of the realty -

= Amount Realized from Sale - (Property basis - Straight-line depreciation taken)

= $4395000 - ($2930000 - $293000)

= $1758000.

.

(b) -- Determine the amount of the recognized gain that is treated as §1231 gain and the amount that is treated as §1250 recapture due to §291.

Answer -

Particulars	Explanation	Amount ($)
§1231 gain	Gain recognized on the sale - §1250 recapture due to §291 = $1758000 - $58600	1699400
§1250 recapture due to §291	Straight-line depreciation taken * 20% = $293000 * 20%	58600