Jason sells a piece of equipment for $43,000.The equipment was purchased four years ago for $56,000.It was depreciated using an accelerated method of depreciation.Its adjusted basis at the time of sale is $21,000.Straight-line depreciation would have been only $20,000.What is the amount and type of gain Jordan recognizes on this sale?

Question

Quizplus · Accepted Answer

The equipment was depreciated using an accelerated method, which means that part of the depreciation was claimed under Section 1245. Therefore, the gain on the sale of the equipment is also treated as a Section 1245 gain. The formula for determining the gain is:
Selling Price - Adjusted Basis = Gain
$43,000 - $21,000 = $22,000
Therefore, the amount of gain recognized by Jason on this sale is $22,000 and it is a Section 1245 gain.

Jason Sells a Piece of Equipment for $43,000