Question

In year O, Javens Inc. sold machinery with a fair market value of $530,000 to Chris. The machinery's original basis was $416,580 and Javens's accumulated depreciation on the machinery was $63,000, so its adjusted basis to Javens was $353,580. Chris paid Javens $53,000 immediately (in year O) and provided a note to Javens indicating that Chris would pay Javens $79,500 a year for six years beginning in year 1. (Do not round intermediate computations.) a. What is the amount and character of the gain that Javens will recognize in year 0? b. What amount and character of the gain will Javens recognize in years 1 through 6? Complete this question by entering your answers in the tabs below Req A Req B What is the amount and character of the gain that Javens will recognize in year 0? Description Recognized Gain Character of Recognized Gain: Ordinary Gain $1231 gairn

Answer 1

Javens Inc. Description (1) Amount realized (2) Original basis (3) Accumulated depreciation (4) Adjusted basis (5) Realized gain/(loss) (6) Ordinary income from $1245 depreciation recapture (not eligible for installment reporting) (7) Gain eligible for installment reporting (8) Gross profit percentage (9) Payment received in year 0 (10) Gain recognized on payment in year 0 Total gain recognized in year 0 (11) Payment received in years 1 through 6 (each year) Gain recognized in years 1 through 6 (with each payment) 17013 (11) x (8) S1231 gain Amountxplaation 530000 Given 416580 Given 63000 Givern 353580 Given 176420 1) (4) Ordinary income 63000 Lesser of (3) and (5) 113420 (5) (6) 21.40% (7)/(1) 53000 Given in example 11342 (9) x (8) S1231 gain 74342 (6) (10) 79500 Given in example