During the current year, Mr. X sold a building he bought in 1986 to XY Corporation for use in its business. Mr. X had used the building in his business. Straight-line depreciation had been claimed on the asset. As a result, Mr. X had a recognized gain of $35,000. Mr. X owns 85% of XY's only class of stock. For income tax purposes, what are the amount and the character of the gain? A $35,000 short-term capital gain. B $35,000 ordinary income. C No income is recognized. D $21,000 ordinary income.

During the current year, Mr. X sold a building he bought in 1986 to XY Corporation for use in its business. Mr. X had used the building in his business. Straight-line depreciation had been claimed on the asset. As a result, Mr. X had a recognized gain of $35,000. Mr. X owns 85% of XY's only class of stock. For income tax purposes, what are the amount and the character of the gain? A $35,000 short-term capital gain. B $35,000 ordinary income. C No income is recognized. D $21,000 ordinary income.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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