Skeen Company paid $90,000 for tangible personalty three years ago and elected to expense and deduct the cost under Section 179. This year, Skeen sold the personalty for $52,700. Accumulated book depreciation through date of sale was $31,000. What is the effect of the sale on Skeen's book income and taxable income?

Question

Quizplus · Accepted Answer

The book loss is calculated as the sale price ($52,700) minus the book value ($90,000 - $31,000 = $59,000), resulting in a $6,300 loss. For tax purposes, the entire cost was expensed under Section 179, so the basis is $0, resulting in a $52,700 gain.

Skeen Company Paid $90,000 for Tangible Personalty Three Years Ago