During the current year, Mrs.Mayhew received a used computer as a gift from her son for her personal use.The computer has a current fair market value of $350 and cost her son $850.He took $400 of depreciation deductions while it was used in his business.Mrs.Mayhew uses the computer for several years and then sells it for $200.What is the amount and type of gain or loss that Mrs.Mayhew recognizes on the sale?
A)$0 gain or loss
B)$150 Section 1245 loss
C)$150 Section 1231 loss
D)$250 Section 1231 loss

Question

Quizplus · Accepted Answer

Mrs. Mayhew recognizes $0 gain or loss on the sale because the computer was a gift, and its sale price ($200) is less than its adjusted basis (original cost minus depreciation, $850 - $400 = $450). Since it was used for personal use, any potential loss is not deductible.

During the Current Year, Mrs