2. You did not receive ful credit for this question in a previous attem was $41,

Question

2.
You did not receive ful credit for this question in a previous attem was $41,400, so lts adjusted basis to Raven was $150,350 Raven received What is the amount and character of the gain thot Raven will recognize in the current year? market value of $200.000. The machinery's onginal basis was $191750 and Raven's accumulated depreciation on the machinery $50000 in the current year and a note paying Raven $75,000 a year for two years beginning in next year Character counter :: 0/s00o0 Previous attempt MacBook Air 0 5 7 8 0

Explanation / Answer

SOLUTION

1. Gain = Value realized on sale - Adjusted basis

= ($50,000 + $75,000 + $75,000) - $150,350

= $200,000 - $150,350 = $49,650

Gain to be recognized in current year= Gain * Received in current year / Total consideration received

= $49,650 * $50,000 / $200,000

= $12,413

The character of gain is an ordinary gain if used in trade or business (it seems since depreciation is charged, machinery was used for business purpose)

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