Question

Foreaker LLC sold a piece of land that it uses in its business for $52,000. Foreaker bought the land two years ago for $42,500. What is the amount and character of Foreaker's gain?

a. $9,500 §1231.
b. $9,500 §1250.
c. $9,500 §1245.
d. $9,500 §1221.
e. None of the choices are correct.

Answer 1

Foreaker LLC's gain from selling the land is $9,500 and it is categorized as §1231. The correct option is A.

Step-by-step explanation:

To calculate Foreaker LLC's gain, we need to subtract the purchase price of the land from the selling price.

Gain = Selling price - Purchase price

Gain = $52,000 - $42,500 = $9,500

Since the land was used in Foreaker's business, the character of the gain is considered to be §1231.The amount and character of Foreaker's gain from the sale of land used in its business is a gain of $9,500.

This gain is calculated by subtracting the original purchase price of the land ($42,500) from the selling price ($52,000).

The correct character of this gain is Section 1231 because the land is a business asset held by Foreaker LLC for more than one year, which makes the gain a long-term capital gain. Therefore, the answer is a. $9,500 § 1231. The correct option is A