Question

In: Accounting

Knight Corporation, a C Corp, disposed of the following assets, all Sec 1231 property, during 2019:...

Knight Corporation, a C Corp, disposed of the following assets, all Sec 1231 property, during 2019:

Asset

Deprec Method

Cost

Accum Deprec

Adj. Basis

Sale Price

Equipment#1

Equipment#2

Building

Land

MACRS – DDB

MACRS – DDB

MACRS - SL

N/A

$55,000

$32,000

$110,000

$45,000

$40,000

$11,000

$50,000

$0

$15,000

$21,000

$60,000

$45,000

$23,000

$30,000

$135,000

$55,000

Question A: How much is Knight Corporation's Sec 1245 ordinary income recapture?

Question B: How much is Knight Corporation's Sec 1250 ordinary income recapture?

Question C: How much is Knight Corporation's Sec 291 ordinary income recapture?

Question D: How much is Knight Corporation's net Sec 1231 gain or loss for 2019 after 1245, 1250, and 291 recapture (before considering the look-back provision)?

Solutions

Expert Solution

A).  How much is Knight Corporation's Sec 1245 ordinary income recapture?

Sec 1245 recapture
Asset Cost Acc dep Adj basis sales price Gain/loss
Equipment 1 55000 40000 15000 23000 8000
Equipment 2 32000 11000 21000 30000 9000
Land 45000 0 45000 55000 10000
Total 27000

B) How much is Knight Corporation's Sec 1250 ordinary income recapture?

Sec 1250 recapture
Asset Cost Acc dep Adj basis sales price Gain/loss
Building 110000 50000 60000 135000 75000
Total

75000

C). How much is Knight Corporation's Sec 291 ordinary income recapture?

Sec 291 recapture
Difference between 1245 and 1250 75000
27000
Total 48000

D) How much is Knight Corporation's net Sec 1231 gain or loss for 2019 after 1245, 1250, and 291 recapture?

Sec 1231 recapture
Particulars Amt
Sec 1245 recapture 75000
Sec 1250 recapture 27000
Total 102000

ekkarill92 answered 3 years ago
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