14. On August 1 of year 0, Dirksen purchased a machine for $20,000 to use in its
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Question
14. On August 1 of year 0, Dirksen purchased a machine for $20,000 to use in its business. On December 4 of year 0, Dirksen sold the machine for $18,000. Use MACRS Table. (Loss amounts should be indicated by a minus sign. Do not round percentages used for calculations. Leave no answer blank. Enter zero if applicable.)
a. What is the amount and character of the gain or loss Dirksen will recognize on the sale?
b. What is the amount and character of the gain or loss Dirksen will recognize on the sale if the machine was sold on January 15 of year 1 instead?
Description Amount Total Gain/(Loss) Recognized $________ Character of Recognized Gain/(Loss) Ordinary Gain/(Loss) $_________ §1231 gain/(loss) $_________ ABLE 1 MACRS Half-Year Convention Depreciation Rate for Recovery Period 3-year 5-year 7-year 10-year 15-year 20-year Year 3.750 7.219 6.677 5.00 9.50 8.55 7.70 6.93 6.23 5.90 5.90 5.91 5.90 5.91 5.90 5.91 5.90 5.91 2.95 20.00 32.00 19.20 11.52 11.52 5.76 14.29 24.49 17.49 12.49 8.93 8.92 8.93 4.46 10.00 18.00 14.40 11.52 9.22 7.37 6.55 6.55 6.56 6.55 3.28 33.33 44.45 14.81 7.41 3 4. 5.713 5.285 4.888 4.522 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 2.231 6 8 9 10 12 13 15 16 17 18 19 20 21Explanation / Answer
Cost of Asset $20,000
Less: Amount realized $18,000
Loss on sale $2,000
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Description
Amount
Total Loss Recognized
$_2,000
Character of Recognized Gain/(Loss)
Ordinary Loss
$0
§1231 loss
$2,000
Year Original Amount Rate Depreciation
1 20,000 20% $4,000
2 20,000 32% $3,200 (for half year)
$7,200
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Amount realized $18,000
Less: Book value of asset
Cost of Asset $20,000
Less: Depreciation $ 7,200
Book Value $12,800
Gain on sale $5,200
=======
Description
Amount
Total Gain Recognized
$5,200
Character of Recognized Gain/(Loss)
Ordinary Gain
$5,200
§1231 gain
$0
Description
Amount
Total Loss Recognized
$_2,000
Character of Recognized Gain/(Loss)
Ordinary Loss
$0
§1231 loss
$2,000
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