A Corporation Sells a Machine Used in Its Business for 9

question 8

Multiple Choice

A corporation sells a machine used in its business for 9 years for $22,000.The machine originally cost $120,000 and was fully depreciated.Its gain will be treated as:

• A)Capital gain
• B)Section 1231 gain
• C)Section 1245 recapture
• D)Section 1250 recapture

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Definitions:

Shoeleather Costs

Shoeleather costs are the metaphorical costs of inflation, referring to the time and effort spent trying to avoid holding onto cash as it loses value.

Real Interest Rate

The rate of interest an investor expects to receive after allowing for inflation.

CPI

Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, used as an indicator of inflation.

Fisher Effect

A theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and nominal interest rates.