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 - SL

N/A

$55,000

$32,000

$110,000

$45,000

$40,000

$11,000

$50,000

$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 1 year ago

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