A sole proprietorship purchased an asset for $1,000 in 2018 and its value was $1,500 at the end of 2018. In 2019, the sole proprietorship sold the asset for $1,400. The sole proprietorship realized a taxable gain of $400 in 2019 but an economic loss of $100 in 2019.

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The taxable gain is calculated based on the difference between the sale price ($1,400) and the purchase price ($1,000), resulting in a $400 gain. The economic loss considers the change in value from the end of 2018 ($1,500) to the sale price in 2019 ($1,400), resulting in a $100 loss.

A Sole Proprietorship Purchased an Asset for $1,000 in 2018