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TP sold his hotel in 2020 for $5,000,000. He owned it and operated it individually....

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Accounting

  1. TP sold his hotel in 2020 for $5,000,000. He owned it and operated it individually. Of the total purchase price, $500,000 was allocated to furniture, fixtures and equipment (FF&E). The adjusted basis of the FF&E at the time of sale was $100,000, and accumulated depreciation on the FF&E totaled $200,000. The tax effect of this allocation on the FF&E is the following:

  1. Capital gain of $400,000
  2. Ordinary (recapture) income of $100,000 and $300,000 of capital gain
  3. Ordinary income of $500,000
  4. Ordinary (recapture) income of $200,000, and capital gain of $200,000
  5. None of the above

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