Choice "B" is correct. Under Sec. 1245, ordinary income is recognized on the gain to the extent of the accumulated depreciation. Any gain in excess of the original cost is capital gain.
Choice "c" is incorrect. The total gain is $100,000 which is the sales price ($200,000) in excess of cost ($160,000) less depreciation ($60,000). Under Sec. 1245, ordinary income is recognized on the gain to the extent of the accumulated depreciation. Any gain in excess of the original cost is capital gain.
Choice "d" is incorrect. Under Sec. 1245, ordinary income is recognized on the gain to the extent of the accumulated depreciation. Any gain in excess of the original cost is capital gain. The total gain is $100,000, but only $60,000 is ordinary income and $40,000 is capital gain income.
Choice "a" is incorrect. The total gain is $100,000, but only $60,000 is ordinary income and $40,000 is capital gain income.