White Company Acquires a New Machine for $35,000 and Uses

question 32

Multiple Choice

White Company acquires a new machine for $35,000 and uses it in White's manufacturing operations.A few months after White places the machine in service, it discovers that the machine is not suitable for White's business.White had fully expensed the machine in the year of acquisition using § 179. White 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:

Car Door

A movable barrier used for entry and exit, as well as security and protection of the occupants, found on the sides of automobiles.

Dentoalveolar Joint

A term that could describe the structural and functional relationship between teeth (dentition) and the alveolar bone, but not a commonly used term. More accurately referred to as the periodontal ligament.

Cervical Region

The upper part of the spine, consisting of the first seven vertebrae that form the neck.

Parietal Bones

Two bones forming the sides and roof of the cranium, each positioned on either side of the skull just behind the frontal bone.