McGraw-Hill's Taxation of Business Entities 3rd Edition by Connie Weaver, Brian Spilker, Edmund Outslay, John Robinson, Ronald Worsham, Benjamin Ayers, John Barrick

Exercise 41

Luke sold a building and the parcel of land the building is built on to his brother at fair market value. The fair market value of the building was determined to be $325,000; Luke built the building several years ago at a cost of $200,000. Luke had claimed $45,000 of depreciation expense on the building. The fair market value of the land was determined to be $210,000; Luke purchased the land many years ago for $130,000. Luke's brother will use the building in his business.
a. What is the amount and character of Luke's recognized gain or loss on the building
b. What is the amount and character of Luke's recognized gain or loss on the land