A sole proprietorship purchased an asset for $1,000 in 2013 and its value was $1,500 at the end of 2013.In 2014,the sole proprietorship sold the asset for $1,400.The sole proprietorship realized a taxable gain of $400 in 2014 but an economic loss of $100 in 2014.

Question

Quizplus · Accepted Answer

The gain realized by selling the asset ($1,400 - $1,000 = $400) is a taxable gain. However, if the original cost of the asset and its value at the end of 2013 were taken into consideration, there was an economic loss ($1,500 - $1,000 = $500; $1,400 - $500 = $900).

A Sole Proprietorship Purchased an Asset for $1,000 in 2013