Melody works in her home.She purchased a computer 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
E)None of the above

Question

Quizplus · Accepted Answer

Melody must recognize a Section 1245 recapture since the adjusted basis of the computer is less than its selling price. The recapture amount is calculated by subtracting the adjusted basis ($1,000) from the selling price ($1,200) which equals $200. Therefore, the answer is D, $200 Section 1245 recapture.

Melody Works in Her Home