White Company Acquires a New Machine for $75,000 and Uses

question 39

Multiple Choice

White Company acquires a new machine for $75,000 and uses it in White's manufacturing operations.A few months after White places the machine in service, it discovers that the machine is not suitable for White's business.White had fully expensed the machine in the year of acquisition using § 179.White sells the machine for $60,000 in the tax year after it was acquired but held the machine only for a total of 10 months.What was the tax status of the machine when it was disposed of and the amount of the gain or loss?

• A)A capital asset and $60,000 gain.
• B)An ordinary asset and $60,000 gain.
• C)A § 1231 asset and $60,000 gain.
• D)A § 1231 asset and $60,000 loss.
• E)None of these.

---

Definitions:

Whale Intermediates

Transitional fossil forms that provide evidence for the evolutionary lineage of whales from land-dwelling mammals.

Four-Legged

Pertaining to organisms, primarily terrestrial vertebrates, that have four limbs, a characteristic feature of tetrapods including mammals, reptiles, and amphibians.

Land Dwelling Mammals

Mammals that primarily inhabit terrestrial environments, as opposed to aquatic or aerial settings, adapted to various landscapes including forests, deserts, and mountains.

Ocean Islands

Ocean islands are landforms that rise from the ocean floor and are not connected to a continent, often formed by volcanic activity.