Luke's Real Estate Sale: Recognized Gain or Loss

Luke's Real Estate Transaction Details

Luke sold a building and the land on which the building sits to his wholly owned corporation, Studemont Corp., at fair market value. The fair market value of the building was determined to be $362,500; Luke built the building several years ago at a cost of $310,000. Luke had claimed $81,000 of depreciation expense on the building. The fair market value of the land was determined to be $252,000 at the time of the sale; Luke purchased the land many years ago for $194,250.

Question

a. What is the amount and character of Luke’s recognized gain or loss on the building?

Answer

The amount and character of Luke’s recognized gain or loss on the building is $133,500.

Explanation

The amount and character of Luke's recognized gain or loss on the building = ($362,500 - $310,000) + $81,000 = $133,500

Therefore, The amount and character of Luke’s recognized gain or loss on the building is $133,500.

What is the amount and character of Luke's recognized gain or loss on the building?

The amount and character of Luke’s recognized gain or loss on the building is $133,500.