Question

1.   Lassen Corporation sold a machine to a machine dealer for $30,750. Lassen bought the machine for $61,000 and has claimed $20,750 of depreciation expense on the machine.

What gain or loss does Lassen realize on the transaction?

2[The following information applies to the questions displayed below.] In year 0, Longworth Partnership purchased a machine for $44,750 to use in its business. In year 3, Longworth sold the machine for $39,300. Between the date of the purchase and the date of the sale, Longworth depreciated the machine by $23,100. (Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

a. What is the amount and character of the gain or loss Longworth will recognize on the sale?

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 $66,250?

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 $18,200 (before the §1231 netting process, if applicable)?    

Answer 1

1.

Sold machine for    $30,750

Net Book Value of Machine ($61,000 - $20,750) ($40,250)

loss Lassen realize - $9500

2.

a.

Sold machine for $39,300

Net Book Value of Machine ($44,750 - $23,100) ($21,650)

Long term Capital Gain Longworth will recognize $17,650

b.

Sold machine for $66,250

Net Book Value of Machine ($44,750 - $23,100)   ($21,650)

Long term Capital Gain Longworth will recognize $44,600

c.

Sold machine for $18,200

Net Book Value of Machine ($44,750 - $23,100) ($21,650)

Long term Capital Loss Longworth will recognize - $3,450

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