Tanisha Buys a Sculpture from a Collector for Resale in Her

question 96

Multiple Choice

Tanisha buys a sculpture from a collector for resale in her gallery for $8,400.She sold it 15 months later for $12,500.What are the nature and amount of the gain on the sale of the sculpture?

• A)$4,100 Section 1245 gain.
• B)$4,100 ordinary income.
• C)$4,100 Section 1231 gain.
• D)$4,100 gain subject to 28% collectibles tax rate.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that reduces the total receivables on the balance sheet to reflect the amount expected to be uncollectable.

Allowance for Doubtful Accounts

An accounting method that reduces accounts receivable on a company's balance sheet by estimating the amount of receivables that will not be collected.

Uncollectible Receivables

Debts owed to a company that are considered unlikelihood to be collected.

Bad Debt Expense

Unrecoverable amounts from accounts receivable representing financial losses for a company.