Car Co. is selling its land and building to Truck Co. for $340,000 (Land $200,000; Building $140,000). These values have not been officially appraised, and Truck Co. thinks that the land is only worth $150,000 and the building is worth $190,000. (Car Co. originally paid $100,000 for the land and constructed the building for $150,000. The UCC on the building is currently $130,000.) Which of the following statements is TRUE based on these facts?

Multiple Choice

a. Future CCA will be higher for Truck Co. if Car Co.'s terms are accurate

b. Car Co. will recognize higher net capital gains if Truck Co.'s terms are accurate

c. Car Co. will recognize higher recapture if Truck Co.'s terms are accurate.

d. The allocation of the costs is irrelevant for tax purposes as the total price is the same under both sets of terms.

Answer rating: 100% (QA)

Car Co will recognize higher recapture if ... View the full answer