Which of the following would extinguish the § 1245 recapture potential?
a. An exchange of depreciable business equipment for like-kind business equipment with gain realized, but not recognized.
b. A nontaxable incorporation under § 351.
c. A nontaxable contribution to a partnership under § 721.
d. A nontaxable reorganization.
e. None of the above.
e
RATIONALE: All of the transactions involve a carryover of basis and do not extinguish the § 1245 depreciation recapture potential.
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The degree of intensity assigned to the responses is commonly referred to as construct intensity.
a. true b. false
Braun Schiffer is a maker of high-quality audio speakers. It is on the verge of launching a new
range of high-powered, yet extremely compact, speakers. The fixed overhead costs for production of these speakers is estimated at $500,000. The costs producing a single unit is $250. The company prices these speakers at $400. The sales forecast projects that 2,000 units will be sold by the end of the first year, 4,500 more in the second year, and 2,500 during the third year after launch. What is the gross profit margin percentage for the first year? A) 50% B) 62.5% C) 25% D) 37.5%