PLEASE HELP Eleven years ago, Lynn Inc. purchased a warehouse for $315,000. This

Question

PLEASE HELP

Eleven years ago, Lynn Inc. purchased a warehouse for $315,000. This year, the corporation sold the warehouse to Firm D for $80,000 cash and D's assumption of a $225,000 mortgage. Through date of sale, Lynn deducted $92,300 straight-line depreciation on the warehouse a. Compute Lynn's gain recognized on sale of the warehouse. b. How much of this recognized gain is treated as capital gain and how much is ordinary? c. How would your answers change if Lynn is a noncorporate business? Complete this question by entering your answers in the tabs below. Required A Required B Required C How much of this recognized gain is treated as capital gain and how much is ordinary? (Leave no cell blank. Enter "O" for cells that do not have an amount.) Capital gain Ordinary gain

Explanation / Answer

Part A

Part B

Ordinary gain will be 20% of as per recapture rule, thus 63840 x 20% = $ 12768 will be Ord. gain and remaining of 63840-12768 = 51072 will be capital gain

Part C

If Lynn was noncorporate business than entire would be capital gain of $ 63840

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Description Amount Cash realized $ 80000 Mortgage $ 225000 Total sales value $ 305000 Warhouse cost $ 315000 Less: Depreciation $ 92300 Adjusted basis $ 222700 Gain $ 82300 Less: Dep $ 18460 Recognized Gain $ 63840

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