Olive Company Sells Factory Equipment with an Adjusted Basis of $30,000

question 1

Multiple Choice

Olive Company sells factory equipment with an adjusted basis of $30,000 for $33,000. Allowable depreciation of $8,000 had been deducted as of the sale date. What is the amount and character of the gain or (loss) on the sale of the equipment?

• A)$- 0 -
• B)$3,000 Section 1245 ordinary income.
• C)$8,000 Section 1245 ordinary income.
• D)$3,000 long-term capital gain, and $8,000 Section 1245 ordinary income.
• E)$3,000 long-term capital gain.

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Definitions:

Veils Are Pierced

A legal metaphor used when courts look beyond the protection usually afforded by the corporate entity structure to hold individuals (e.g., directors, shareholders) personally liable for corporate debts or actions.

Shareholder

An individual or entity that owns one or more shares of stock in a corporation, thus holding a portion of the corporation's ownership and often entitled to a share of the corporation's profits and voting rights.

Domination

The exercise of control or influence over someone or something, or the state of being dominant.

Pseudo-Foreign Corporation

A business entity that operates in a country different from its country of incorporation but is treated as a domestic company for legal or tax purposes.