Melody works in her home using a computer she purchased two years ago for $2,500.The total adjusted basis for the computer is now $1,000.Her husband and children used the computer 20 percent of the time to play computer games and for personal correspondence.She sells the computer for $1,200.How much and what kind of gain does Melody recognize?
A)$200 capital gain
B)$200 Section 1245 recapture
C)$200 Section 1231gain
D)$460 Section 1245 recapture

Question

Quizplus · Accepted Answer

The computer is a depreciable asset used in a trade or business. The adjusted basis is $1,000, and it is sold for $1,200. The gain is $200. Since the computer was used 20% for personal use, 20% of the gain, or $40, is not subject to recapture. The remaining 80% of the gain, or $160, is subject to Section 1245 recapture.

Melody Works in Her Home Using a Computer She Purchased