Question

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In year 0, Longworth Partnership purchased a machine for $53,500 to use in its business. In year 3, Longworth sold the machine for $40,700. Between the date of the purchase and the date of the sale, Longworth depreciated the machine by $22,500. (Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

b. What is the amount and character of the gain or loss Longworth will recognize on the sale if the sale proceeds are increased to $66,500?

c. What is the amount and character of the gain or loss Longworth will recognize on the sale if the sale proceeds are decreased to $23,600 (before the §1231 netting process, if applicable)?

Answer 1

390 Answn Adjusted basis = original basis - Accumulated Depreciation = 53,500-22.500 = 31,000 Gain|Cioac Drecognized = Amount realized – adjusted basis = 66,500 -- 31,000 = 35,500 Lesses de accumulated depreciation and gain [Close) recogniked = Oblircay net income = 3a, 500 1931 gain = Groen Illess) recognized – ordinary net income = 35,500 - 22.500 = 13,000 Amount particular Amount realised -original basis hccumulated Depreciatico Adjusted bases. Grainlloss) Recognized ordinary income (1245 de piciation recapture) 66.500 53,500 22.500 31,000 35,500 22.500 I

| 1231 gain | 32,000 © decognised Jain = amount valised – original basis + depreciation 40 700 -- 53,500+ 22, 500 -$9700 if amount realise is 23,60 then, recognised loss toould be $7400. ordinary loss - dessey of Da soo and 7400. 5:7400 because, if amount realise is 23,600 and recognized loss is 7400. and, if amount realise 23,600 recopiaed & Orimavy loss is 7400 then, - 1231 gain =0 Description Amount () I'otal dess ricognized character dy recognised loss: I ordinary loss 1@31 loss -7400 -7400