Operations, Corporation, S Corporation (LO. 1)

Lulu Enterprises sells a building with an adjusted basis of $40,000 for $85,000. Lulu paid $60,000 for the building five years ago. Assume straight-line MACRS depreciation.

Complete each statement, based on the entity described, that outlines the treatment of the gain on the sale of the building.

a. Lulu is a sole proprietorship owned by Horace. The portion of the gain attributable to depreciation is $___ and classified as unrecaptured Section 1250 gain . The remaining $___ of gain is a Section 1231 gain .

b. Lulu is a partnership owned equally by Doreen and Fatima. The portion of the gain attributable to depreciation is $___ and classified as unrecaptured Section 1250 gain . The remaining $___ of gain is a Section 1231 gain .

c. Lulu is a corporation owned equally by Doreen and Fatima. A corporation reports the $45,000 gain on the sale as $___ in ordinary income and $___ of Section 1231 gain .

d. Lulu is an S corporation owned equally by Doreen and Fatima. An S corporation reports the $45,000 gain on the sale as $___in ordinary income and $___ of Section 1231 gain .