AC553_W7_Solution12_51

AC553_W7_Solution12_51 - the selling price of \$80,000 and...

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1 Problem 12-51 Solution Section 1245 Property: Disposition of Property (¶12,725) In 2007, Emma Evans sold a piece of equipment from her business for \$80,000. The equipment was purchased in 2003 for \$72,000, had a useful life of five years, and was depreciated on a straight-line basis. A total of \$50,400 depreciation was taken. a. How will the gain or loss on the sale be treated? b. How would Emma have treated the gain or loss if she had sold the property for \$15,000? Solution: a. Emma has a realized and recognized gain of \$58,400. This is the difference between
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Unformatted text preview: the selling price of \$80,000 and the basis of \$21,600 (\$72,000 1 \$50,400). There is \$50,400 recaptured as ordinary income to the extent of total depreciation taken, and the remaining \$8,000 is Section 1231 gain. b. If the property has been sold for \$15,000, there is a realized and recognized loss of \$6,600 (\$15,000 1 \$21,600) and it is a Section 1231 loss. Recapture rules do not apply in a recognized loss situation....
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