Question

Bateman Corporation sold an office building that it used in its business for $800,750. Bateman bought the building 10 years ago for $599,625 and has claimed $201,125 of depreciation expense. What is the amount and character of Bateman's gain or loss

Answer 1

Bateman Corporation

a. The amount of the gain = $402,250.

b. The character of the gain is long-term capital gain.

Step-by-step explanation:

a) Data and Calculations:

Sale proceeds from office building = $800,750

Purchase cost of building = $599,625

Period of building before sale = 10 years

Depreciation claimed on building = $201,125

Net book value of building = $398,500 ($599,625 - $201,125)

Capital gain on sale of building = $402,250 ($800,750 - $398,500)

b) Bateman Corporation will record a capital gain of $402,250. This is the difference between the sale proceeds from the building and the net book value of the building after deducting the depreciation expenses claimed on the building. It is a long-term capital gain, which is taxed under the reduced rate.