Quidik Corporation sold a machine for $80,000 that it had acquired three years ago for $68,000.If its adjusted basis when sold was $50,000, what should Quidik report on its tax return as a result of this sale?
A)Section 1245 recapture of $18,000; Section 1231 gain of $30,000;
B)Ordinary income of $12,000 and Section 1231 gain of $18,000
C)Section 1245 recapture of $18,000 and Section 1231 gain of $12,000;
D)Section 1231 gain of $38,000

Question

Quizplus · Accepted Answer

The Section 1245 recapture is the difference between the original cost and the adjusted basis ($68,000 - $50,000 = $18,000). The Section 1231 gain is the difference between the sale price and the original cost ($80,000 - $68,000 = $12,000).

Quidik Corporation Sold a Machine for $80,000 That It Had