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please show work and explain answer Copper Corporation sold machinery for $47,000 on December 31, 2019....

please show work and explain answer

Copper Corporation sold machinery for $47,000 on December 31, 2019. The machinery had been purchased on January 2, 2016, for $60,000 and had an adjusted basis of $41,000 at the date of the sale. For 2019, what should Copper report?
a. Ordinary income o f $6,000.
b. A § 1231 gain of $6,000.
c. A§ 1231 gain of $6,000 and $3,000 of ordinary income.
d. None of these.
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Answer #1

Correct choice B

Sale proceeds of machine = 47000

Basis of machine = 41000

Gain on sale of machinery = 47000 - 41000 = 6000

The gain is not earned in the normal course of business and is a one time gain. Also, in order to report the gain as ordinary gain, the company has to report the machine as inventory which is not the case here.

Hence, it should be classified a section 1231 gain.  

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