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JKCPA
JKCPA, CPA
Category: Tax
Satisfied Customers: 5884
Experience:  CPA with tax experience.
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Kevin Broid owns all the stock of Dana Corporation. During

Resolved Question:

Kevin Broid owns all the stock of Dana Corporation. During the year, Kevin sold a building to Dana for $150,000. The building cost $120,000, its adjusted basis was $94,000, and it was depreciated under the straight-line method. Dana intends to use the building in its operations. Kevin’s tax consequences of the sale are:

a. $56,000 dividend income
b. $56,000 ordinary income
c. $56,000 Code Sec. 1231 gain
d. $26,000 ordinary income and $30,000 Code Sec. 1231 gain
e. $56,000 long-term capital gain
Submitted: 6 years ago.
Category: Tax
Expert:  JKCPA replied 6 years ago.
Hi Customer,

Thanks for your question.

The answer is: b. $56,000 ordinary income.
Kevin owns more than 50% of Dana Corp. Since the depreciated building also is
depreciable property in Dana’s hands, Sec 1239 applies. Thus, the entire gain of $56,000 is ordinary income.

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