Question

mega inc. sold an office building this year, generating $50,000 of gain. the building had $400,000 of accumulated depreciation for tax purposes, computed using the straight-line method. how much depreciation recapture does mega recognize on the sale? multiple choice question. $10,000 $50,000 $0

Answer 1

The entire gain of $50,000 from the sale of the office building by Mega Inc. corresponds to the accumulated depreciation and is treated as depreciation recapture for tax purposes.

Step-by-step explanation:

When Mega Inc. sold an office building this year, the sale resulted in a $50,000 gain. The accumulated depreciation for tax purposes was $400,000, computed using the straight-line method.

Depreciation recapture refers to the portion of the sale gain that must be reported as ordinary income, to the extent of prior depreciation deductions.

Since the gain is equal to the accumulated depreciation, the entire gain of $50,000 will be treated as depreciation recapture.