[The following information applies to the questions displayed below On August 1

Question

[The following information applies to the questions displayed below On August 1 of year 0, Dirksen purchased a machine for $40,750 to use in its business. On December 4 of year 0, Dirksen sold the machine for $32,500 (Use MACRS Table) (los indicated by a minus sign. Do not round percentages used for calculations. Leave no answer blank. Enter zero if applicable ) value 100 points a. What is the amount and character of the gain or loss Dirksen will recognize on the sale? Amount Total Gaini Loss) Recognized Character of Recognized Gain/Loss) Ordinary GainiLoss) § 1231 gain/(loss

Explanation / Answer

a. Amount and character of the gain or loss will be Loss of $8,250 (40,750-32,500 = 8,250) and this loss is ordinary loss.

As the asset is sold in the same year of purchase so there will be no depreciation.

S.No Particulars Amount 1 Amount realized (a) 32,500 2 Original basis (b) 40,750 3 Accumulated dep (c ) 0 4 Adjusted basis (b-c ) 40,750 5 Gain (loss) recognized -8,250 6 Ordinary Income (lesser of 3 or 5) -8,250 7 Section 1231 loss (5-6) 0

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