Tom Truman Sells a Business Machine Which He Has Owned

question 37

Multiple Choice

Tom Truman sells a business machine which he has owned for four years for $27,000. Tom purchased the machine for $42,000 and has taken $18,000 in depreciation. How much and what type of gain will result from this sale?

• A) $3,000 long-term capital gain
• B) $3,000 ordinary income
• C) $18,000 ordinary income; $3,000 long-term capital gain
• D) $3,000 Section 1231 gain

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Definitions:

Neurotic Need

Excessive, compulsive desires that occur in an individual due to psychological conflicts or anxieties.

Unconscious Forces

The underlying, often hidden, motivations and desires that influence thoughts, feelings, and behaviors, according to psychoanalytic theory.

Situational Variables

External factors or conditions that can influence the outcome of research or the behavior of individuals in a given context.

Erikson

Refers to Erik Erikson, a developmental psychologist known for his theory on the psychosocial stages of human development.