During the current year,Hugo sells equipment for $150,000.The equipment cost $175,000 when placed in service two years ago,and $55,000 of depreciation deductions were allowed.The results of the sale are
A)LTCG of $30,000.
B)Sec.1231 gain of $30,000.
C)Sec.1245 ordinary income $30,000.
D)Sec.1250 ordinary income of $30,000.

Question

Quizplus · Accepted Answer

The equipment is subject to Sec. 1245 recapture rules. The gain is calculated as the selling price ($150,000) minus the adjusted basis ($175,000 - $55,000 = $120,000), resulting in a $30,000 gain. Under Sec. 1245, this gain is treated as ordinary income to the extent of depreciation taken.

During the Current Year,Hugo Sells Equipment for $150,000