A sole proprietorship purchased an asset for $1,000 in 2014 and its value was $1,500 at the end of 2014.In 2015,the sole proprietorship sold the asset for $1,400.The sole proprietorship realized a taxable gain of $400 in 2015 but an economic loss of $100 in 2015.

Question

Quizplus · Accepted Answer

The realization requirement was not satisfied until 2014,and thus $400 in gross income was recognized in that year.Under the economic concept of income,the asset declined in value by $100 in 2015 and thus a loss was incurred in that year.

A Sole Proprietorship Purchased an Asset for $1,000 in 2014