Angel sells the following depreciable assets from her sole proprietorship: Asset Cost Age Gain/Loss
Office furniture $10,000 4 years ($2,400)
Truck $20,000 5 years 3,100
Bakery equipment $25,000 9 months (4,500)
What should Angel report on her income tax return relative to these property transactions?

Question

Quizplus · Accepted Answer

- The gain/loss on the office furniture is a Section 1231 loss because it is being sold at a loss after being held for more than one year. This can offset any Section 1231 gains that Angel has had during the year. The loss is $2,400.
- The gain/loss on the truck is a Section 1245 recapture because it is being sold at a gain and was used in Angel's trade or business. The recapture amount is $3,100.
- The gain/loss on the bakery equipment is an ordinary loss because it was sold for less than its original cost and it had not been held for more than one year. The loss is $4,500.

Angel Sells the Following Depreciable Assets from Her Sole Proprietorship