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JKCPA
JKCPA, CPA
Category: Tax
Satisfied Customers: 5884
Experience:  CPA with tax experience.
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Sandra Sherman incorporates her apartment building. It has

Resolved Question:

Sandra Sherman incorporates her apartment building. It has a basis of $50,000, a value of $150,000, is subject to a mortgage of $70,000 and has a depreciation recapture potential of $12,000. If Sandra receives stock worth $80,000, she will recognize:

a. No gain.
b. $30,000 of gain, $12,000 of which is ordinary.
c. $12,000 of ordinary income.
d. $20,000 of gain, $12,000 of which is ordinary.
Submitted: 6 years ago.
Category: Tax
Expert:  JKCPA replied 6 years ago.
Hello Customer,

Thanks for your question.

The answer is b. $30,000 of gain, $12,000 of which is ordinary.
$80,000 received in stock - $50,000 basis = $30,000 gain. Depreciation recapture characterizes $12,000 as ordinary income.

Hope this helps!
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