A business machine, which cost $10,000 two years ago, was sold on January 1, thi

Question

A business machine, which cost $10,000 two years ago, was sold on January 1, this year, for $19,000. Depreciation was as follows for the calendar-year taxpayer:

Actual Depreciation                     Straight-line Would

Allowed and Allowable                      Have Been   

Two years ago           $1,429                                             $1,000

Last year                     2,449                                               2,000

This year                        875                                                  500

$4,753                                             $3,500

The adjusted basis of the property sold is:

$5,247

$6,500

$10,000

None of the above

The gain realized and recognized on the sale is:

$9,000

$12,500

$13,753.      

$19,000

None of the above

The character or nature of the gain realized and recognized is:

All ordinary income

All capital gain

$4,753 ordinary income, $9,000 1231 capital gain

$3,500 ordinary income, $9,000 1231 capital gain

None of the above

$5,247

$6,500

$10,000

None of the above

Explanation / Answer

1) The Adjsuted basis property sold is $5247(a) option

2) The Gain recognized on sale : - $ 13753 (c)

3) All capital Gain ( b) option

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