White Company Acquires a New Machine for $75,000 and Uses

question 21

Multiple Choice

White Company acquires a new machine for $75,000 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 $60,000 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 $60,000 gain.
• B) An ordinary asset and $60,000 gain.
• C) A § 1231 asset and $60,000 gain.
• D) A § 1231 asset and $60,000 loss.
• E) None of the above.

---

Definitions:

Obligor

A person who is bound by a promise or other obligation; a promisor.

Statute of Frauds

A legal doctrine requiring certain contracts to be documented in writing and officially signed, aimed at preventing fraudulent claims and enforcing agreements.

Oral Contract

An agreement between parties that is spoken and not written, yet is legally binding under certain conditions.

Indefinite Period

A time span without a specified end date.