Problem:
Knox sold his farm, which included a barn that housed dairy cows. The barn sold for $380,000. He built the barn for $310,000 five years ago. The barn was eligible for 50% bonus depreciation plus straight-line depreciation of $38,750 for a total accumulated depreciation of $193,750 over the 5 years he used the barn in the farm business. Determine the character of the recognized gain or loss on the sale.
- $155,000 Section 1250 recapture, $38,750 unrecaptured Section 1250 gain, $70,000 Section 1231 gain
- $0 Section 1250 recapture, $193,750 unrecaptured Section 1250 gain, $70,000 Section 1231 gain
- $38,750 Section 1250 recapture, $155,000 unrecaptured Section 1250 gain, $70,000 Section 1231 gain
- $0 Section 1250 recapture, $0 unrecaptured Section 1250, $263,750 Section 1231 gain