ZuoTi.Pro
Question

On March 17, a calendar-year taxpayer sells a machine used in its business for $9,000. The...

On March 17, a calendar-year taxpayer sells a machine used in its business for $9,000. The machine was purchased sixteen months earlier for $8,500 and depreciation deductions of $1,800 have been taken. What is the amount and type of gain

recognized on the sale?

a. $2,300 Section 1231 gain

b. $2,300 ordinary income

c. $1,800 Section 1245 recapture; $500 Section 1231 gain

d. $1,800 Section 1250 recapture; $500 Section 1231 gain

e. None of the above

Please give an explanation as to how you got the answer!

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Net book value = Cost - Accumulated depreciation

= 8,500 - $1,800

= $6,700

Gain = Selling price - Net book value

= $9,000 - $6,700

= $2,300

Section 1245 gain = $1,800 (upto the amount of depreciation deduction)

Section 1231 gain = $2,300 - $1,800 = $500 (Section 1245 assets comprises of personal property)

The answer is C.

0 0
Add a comment
Know the answer?
Add Answer to:
On March 17, a calendar-year taxpayer sells a machine used in its business for $9,000. The...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • ABC Corporation, a calendar-year C corporation, sold several business-use assets during the current year. Information regarding...

    ABC Corporation, a calendar-year C corporation, sold several business-use assets during the current year. Information regarding the asset sales is provided below. The company purchased these assets more than one year ago. The building and warehouse were depreciated using the straight-line method. In the table below, enter the following: 1. amounts of recognized gain(loss); 2. Section 1245 and 1250 recapture; and 3. Section 1231 gain (loss) for each asset sold during the year. Enter gains as positive amounts and losses...

  • During the current year, a taxpayer sells equipment for $150.000 that was placed in service in...

    During the current year, a taxpayer sells equipment for $150.000 that was placed in service in 2012. The equipment cost $175,000, and $55,000 of depreciation deductions were taken. The results of the sale are: OLTCG of $30,000 Sec. 1245 ordinary income of S30,000 Sec. 1250 ordinary income of $30,000 None of the above

  • Bigham Corporation, an accrual basis calendar year taxpayer, sells its services under 12-month and 24-month contracts....

    Bigham Corporation, an accrual basis calendar year taxpayer, sells its services under 12-month and 24-month contracts. The corporation provides services to each customer every month. On July 1, 2019, Bigham sold the following customer contracts: Length of contract Total Proceeds 12 months $18,400 24 months $36,800 Determine the income to be recognized in taxable income in 2019 and 2020. Length of Contract 2019 Income 2020 Income 12 months $ $ 24 months $ $

  • Exercise 4-22 (Algorithmic) (LO. 2) Bigham Corporation, an accrual basis calendar year taxpayer, sells its services...

    Exercise 4-22 (Algorithmic) (LO. 2) Bigham Corporation, an accrual basis calendar year taxpayer, sells its services under 12-month and 24-month contracts. The corporation provides services to each customer every month. On July 1, 2019, Bigham sold the following customer contracts: Length of contract 12 months Total Proceeds $40,000 $80,000 24 months Determine the income to be recognized in taxable income in 2019 and 2020. Length of Contract 2019 Income 2020 Income 12 months $ $ $ 24 months

  • EFG, a calendar year, accrual basis corporation, reported $479,900 net income after tax on its financial...

    EFG, a calendar year, accrual basis corporation, reported $479,900 net income after tax on its financial statements prepared in accordance with GAAP. The corporation’s financial records reveal the following information: EFG earned $10,700 on an investment in tax-exempt municipal bonds. EFG’s allowance for bad debts as of January 1 was $21,000. Write-offs for the year totaled $4,400, while the addition to the allowance was $3,700. The allowance as of December 31 was $20,300. On August 7, EFG paid a $6,000...

  • Please read the article and answer about questions. You and the Law Business and law are...

    Please read the article and answer about questions. You and the Law Business and law are inseparable. For B-Money, the two predictably merged when he was negotiat- ing a deal for his tracks. At other times, the merger is unpredictable, like when your business faces an unexpected auto accident, product recall, or government regulation change. In either type of situation, when business owners know the law, they can better protect themselves and sometimes even avoid the problems completely. This chapter...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT