In the Current Year, Raven Sold Machinery with a Fair

question 8

Essay

In the current year, Raven sold machinery with a fair market value of $200,000. The machinery's original basis was $190,000 and Raven's accumulated depreciation on the machinery was $40,000, so its adjusted basis to Raven was $150,000. Raven received $50,000 in the current year and a note paying Raven $75,000 a year for two years beginning in next year. What is the amount and character of the gain that Raven will recognize in the current year?

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Definitions:

Classical Conditioning

A process of learning in which two events that repeatedly occur close together in time become tied together in a person’s mind and so produce the same response.

Self-hypnosis

A process where an individual induces a state of hypnosis in themselves, usually for purposes of self-improvement or therapy.

Regression

A defense mechanism in psychology where an individual's behavior reverts to an earlier stage of development.

State-dependent Learning

A phenomenon where an individual's ability to recall information is enhanced when in the same state of consciousness as when the information was learned.