Question

a business sold two buildings. the first was sold for $52,000, original cost of $50,000 and undepreciated capital cost (ucc) of $40,000. the second was sold for $56,000, original cost of $75,000 and ucc of $60,000. the business owned no other buildings. what amounts would be added or deducted in computing net income? question 15select one: a. recapture $12,000 and allowable capital loss $4,000. b. recapture $10,000 and allowable capital loss $2,000. c. recapture $10,000, terminal loss $4,000, taxable capital gain $1,000. d. recapture $12,000 and terminal loss $4,000.

Answer 1

The amounts added or deducted in computing net income from the sale of the two buildings are recapture amounts and allowable capital losses.

Step-by-step explanation:

In computing net income from the sale of the two buildings, the amounts that would be added or deducted are as follows:

• For the first building, the recapture amount would be $12,000 (the undepreciated capital cost - the original cost) and the allowable capital loss would be $4,000 (the original cost - the selling price).
• For the second building, the recapture amount would be $10,000 (the undepreciated capital cost - the original cost) and the allowable capital loss would be $2,000 (the original cost - the selling price).

So, the correct answer is option b. recapture $10,000 and allowable capital loss $2,000.