The Sale of Machinery for More Than the Original Cost

question 45

Multiple Choice

The sale of machinery for more than the original cost basis (before depreciation) , used in a trade or business, and held for more than one year results in the following types of gain or loss?

• A) Capital and Ordinary.
• B) Ordinary only.
• C) Capital and §1231.
• D) §1245 and §1231.
• E) None of the choices are correct.

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Definitions:

Sales Discounts

Reductions granted on the selling price of goods or services to encourage prompt payment by customers.

Sales Returns

Transactions where customers return previously purchased merchandise, leading to a refund or credit.

Sales Returns

Transactions where customers return previously purchased merchandise, leading to a deduction from the gross sales to arrive at the net sales figure.

Debit Balance

A situation where the total debits exceed the total credits in an account.