A Business Taxpayer Trades in a Used Fully Depreciated Machine

question 119

Essay

A business taxpayer trades in a used fully depreciated machine on a replacement machine. Because the machine traded in was worth more than the replacement machine, the taxpayer received cash in the transaction.Assume the used machine originally cost $100,000, was worth $32,000 when it was traded in, and the replacement machine was worth $20,000. Consequently, the taxpayer received $12,000 cash in the transaction.Is there recognized gain in this transaction and, if so, what type of gain?

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Definitions:

Spain's Monopoly

Refers to the exclusive control and trade privileges Spain held over its overseas colonies, particularly in the Americas, during the 16th to 18th centuries.

Political Stability

The condition of a nation or state in which it operates effectively without significant civil disorder, government dysfunction, or political unrest.

Sir Walter Raleigh

An English adventurer, writer, and courtier of the late 16th and early 17th centuries, known for his exploration of America and attempts to establish colonies.