Blue Company Acquires a Used Machine for $45,000 and Uses

question 55

Multiple Choice

Blue Company acquires a used machine for $45,000 and uses it in Blue's manufacturing operations.A few months after Blue places the machine in service,it discovers that the machine is not suitable for Blue's business.Blue had fully expensed the machine in the year of acquisition using § 179.Blue sells the machine for $5,000 in the tax year after it was acquired,but held the machine only for a total of 10 months.What was the tax status of the machine when it was disposed of and the amount of the gain or loss?

• A) A capital asset and $5,000 gain.
• B) An ordinary asset and $5,000 gain.
• C) A § 1231 asset and $5,000 gain.
• D) A § 1231 asset and $5,000 loss.
• E) None of the above.

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Definitions:

Conscientiousness

An attribute of character involving being orderly, dependable, and deeply committed to obligations.

Extraversion

A personality trait characterized by outgoingness, high energy, and sociability.

Division Of Labor

The assignment of different parts of a manufacturing process or task to different people in order to improve efficiency.

Widowhood

The state or period of being a widow or widower, experienced after the death of a spouse.