On January 2 of the current year, City M gave the A Corporation $200,000 cash to
ID: 2544340 • Letter: O
Question
On January 2 of the current year, City M gave the A Corporation $200,000 cash to purchase a building within the city limits. The building was purchased on June 1 of the same year for $150,000. What is the correct method of handling the excess money received? A. Reduction of basis in other assets. B. Nontaxable contribution to capital with $50,000 that is not spent being added to the basis of the building that was purchased. C. Long-term capital gain. D. Short-term capital gain. On January 2 of the current year, City M gave the A Corporation $200,000 cash to purchase a building within the city limits. The building was purchased on June 1 of the same year for $150,000. What is the correct method of handling the excess money received? A. Reduction of basis in other assets. B. Nontaxable contribution to capital with $50,000 that is not spent being added to the basis of the building that was purchased. C. Long-term capital gain. D. Short-term capital gain.Explanation / Answer
Since the building is sold within one year of acquisition ,The gain on sale is a short term capital gain .
Gain on sale = value received - cost
= 200000 -150000
= $ 50,000 gain .
correct option is "D" -Short-term capital gain.