Question

In downtown Metropolis, Mr. Kent owns several small office buildings in which he rents space to various professionals. Last year he sold two of his rental buildings. Mr. Kent sold one of the buildings, Lois Lane Office Suites, for $450,000; Mr. Kent’s basis in Lois Lane Office Suites was $400,000. Mr. Kent sold the second building, Kryptonite Professional Center, for $470,000. Mr. Kent’s basis in Kryptonite Professional Center was $540,000. He had owned both buildings for several years. Depreciation claimed by Mr. Kent was not accelerated or otherwise subject to any recapture rules.

(a) What is the character of Mr. Kent’s gains and losses? Assume no other transactions during the year.

(b) What is the result if Mr. Kent’s basis in Kryptonite Professional Center was $490,000? (all other information remains the same as originally stated)

(c) What is the result if Mr. Kent’s basis in Lois Lane Office Suites was $490,000? (all other information remains the same as originally stated)

(d) What is the result if Lois Lane Office Suites was held for 11 months at the time of the sale? (all other information remains the same as originally stated)

Answer 1