Acorporation owns many acres of timber, which it acquired three years ago, and which has a $120,000 basis. the timber was cut last year for use in the corporation's business. the fmv of the timber on the first day of last year was $270,000. the corporation made the appropriate election to treat the cutting as a sale or exchange. the timber is sold for $300,000 this year. the tax result this year is:

a) recognition of capital gain of $30,000.
b) recognition of sec. 1231 gain of $30,000.
c) recognition of ordinary income of $30,000.
d) no income recognized since all recognition occurs in the year of the cutting of the timber.

C) recognition of ordinary income of $30,000

Explanation:

Since the corporation decided to treat the cutting of the timber as a sale, the difference between the timber's fair market value and its selling price must be recognized and taxed as ordinary income.

ordinary income = Selling price - fair market value = $300,000 - $270,000 = $30,000

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