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.

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Definitions:

Key Ingredient

An essential component or factor necessary for achieving a specific result or effect.

Paranoid Personality Disorder

A mental health condition characterized by persistent mistrust and suspicion of others without sufficient basis.

Paranoid Schizophrenia

A subtype of schizophrenia characterized by intense delusions or auditory hallucinations relating to themes of persecution or grandiosity.

Delusional

A false belief held with strong conviction despite superior evidence to the contrary, often indicative of a psychological disorder.