In the Current Year, Raven Sold Machinery with a Fair

question 64

Essay

In the current year, Raven sold machinery with a fair market value of $200,000. The machinery's original basis was $190,500 and Raven's accumulated depreciation on the machinery was $40,400, so its adjusted basis to Raven was $150,100. Raven received $49,900 in the current year and a note paying Raven $75,050 a year for two years beginning next year. What is the amount and character of the gain that Raven will recognize in the current year?

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Definitions:

Mechanic's Lien

A legal claim against a property by a contractor or repair person for unpaid labor or materials.

Materialman's Lien

A legal claim against a property by a contractor, supplier, or worker for unpaid labor or materials provided for improving the property.

Accommodation Surety

is a guarantor who agrees to be responsible for another's debt or obligation as a favor, without receiving any benefit.

Compensated Surety

A compensated surety refers to a person or entity that is paid to guarantee the performance of an obligation by another party.