On March 17, a Calendar-Year Taxpayer Sells a Machine Used

question 71

Multiple Choice

On March 17, a calendar-year taxpayer sells a machine used in its business for $9,500.The machine was purchased sixteen months earlier for $9,000 and depreciation deductions of $1,800 have been taken.What is the amount and type of gain recognized on the sale?

• A)$2,300 Section 1231 gain
• B)$2,300 ordinary income
• C)$1,800 Section 1245 recapture; $500 Section 1231 gain
• D)$1,800 Section 1250 recapture; $500 Section 1231 gain

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Definitions:

Uniform Electronic Transactions Act

A legal framework adopted by some states that equates electronic signatures and records with paper ones, facilitating e-commerce and digital contracts.

Indorse

Indorse is an alternative spelling of endorse, typically referring to the act of signing the back of a negotiable instrument to make it payable to someone other than the designated payee.

Unattached Piece

A component or part that is not connected or associated with the main body or structure to which it could belong.

Federal Trade Commission (FTC)

A U.S. federal agency established to protect consumers and promote competition by preventing anticompetitive, deceptive, and unfair business practices.