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39. Lee recognizes $35,000 of Sec. 1231 gains and $25,000 of Sec. 1231 losses during the current year. The only other Sec. 1231 item was a $4.000 loss three years ago. This year, Lee must report A) NLTCG Ordinary Income $10.000 SO B) NLTCG $6.000 Ordinary Income $4,000 C) NLTCG $4,000 Ordinary Income $6,000 D NLTCG $4,000 Ordinary Income $10,000 40. During the current year, Hugo sells equipment for $150,000. The equipment cost $175,000 when placed in service two years ago, and $55,000 of depreciation deductions were allowed. The results of the sale are A) LTCG of $30,000. B) Sec. 1231 gain of $30,000 potentially receiving LTCG treatment after application of the Sec. 1231 netting process. C) Sec. 1245 ordinary income $30,000. D) Sec. 1250 ordinary income of $30,000. 41. Maria purchased a building in 2010 that she uses in her business. Maria uses the straight-line method for the building. Maria's original cost for the building is $420,000 and cost-recovery deductions are $120,000. Maria is in the top tax bracket and has never sold any other business assets. If the building is sold for $560,000, the tax results are A) $260,000 Sec. 1231 gain, all taxable at 20%. B) $260.000 unrecaptured Sec. 1250 gain, all taxable at 25%. C) $260.000 Sec. 1231 gain, of which $120.000 is unrecaptured Sec. 1250 gain taxable at 25% and the $140,000 balance is taxable at 20%. D) $120,000 Sec. 1245 ordinary income, $140.000 Sec. 1231 gain taxable at 20%

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