Pratt owns land that it operates as a parking lot. A shed was erected on the lot for the related transactions with customers. Withregard to capital assets and Sec. 1231 assets, how should these assets be classified?Both of these assets are classified as ordinaryB Land-Sec. 1231, Shed - capitalLand-capital, Shed - Sec. 1231capitalD Land-Sec. 1231, Shed - Sec. 1231Land-capital, Shed-capital

Section 1231 can be considered the “best of both worlds” for a taxpayer it allows the taxpayer to…

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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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Question

Pratt owns land that it operates as a parking lot. A shed was erected on the lot for the related transactions with customers. With
regard to capital assets and Sec. 1231 assets, how should these assets be classified?
Both of these assets are classified as ordinary
B Land-Sec. 1231, Shed - capital
Land-capital, Shed - Sec. 1231capital
D Land-Sec. 1231, Shed - Sec. 1231
Land-capital, Shed-capital

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