Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several year ago and has a claimed $12,5000 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

a. 7,500 section 1231 loss

b. $7,500 section 1231 gain

c. $7,500 ordinary gain

d. 7,500 capital gain

e. none of these

Question

Business

Jakob

20 February, 19:50

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several year ago and has a claimed $12,5000 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

a. 7,500 section 1231 loss

b. $7,500 section 1231 gain

c. $7,500 ordinary gain

d. 7,500 capital gain

e. none of these

+2

Answers (1)

Know the Answer?

Dixie Kelley · Answer 1

c. $7,500 ordinary gain

Explanation:

Depreciated value of Machine = $55,000 - $12,500

= $ 42,500

Sale price of Machine = $ 50,000

Gain on sale of Asset = $ 50,000 - $ 42,500

= $ 7,500

Therefore, The amount and character of Butte's gain or loss is $7,500 ordinary gain.