Bozeman sold equipment that it uses in its business for $80,000. Bozeman bought

Question

Bozeman sold equipment that it uses in its business for $80,000. Bozeman bought the equipment two years ago for $75,000 and has claimed $20,000 of depreciation expense. What is the amount and character of Bozeman's gain or loss?

a.

$25,000 §1231 gain.

b.

$20,000 ordinary gain (§1245 recapture), and $5,000 §1231 gain.

c.

$5,000 ordinary gain (§1245 recapture), and $20,000 §1231 gain.

d.

$25,000 capital gain.

e.

None of these.

a.

$25,000 §1231 gain.

b.

$20,000 ordinary gain (§1245 recapture), and $5,000 §1231 gain.

c.

$5,000 ordinary gain (§1245 recapture), and $20,000 §1231 gain.

d.

$25,000 capital gain.

e.

None of these.

Explanation / Answer

Since the gain is for more than 2 years, it cannot be ordinary gain, hence its a capital gain.

D. 25,000 CAPITAL GAIN.

(80000 - 55000 = 25000)

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