Classify the gain or loss on each of George's assets listed below using the following codes. Note: a code may be used once, more than once, or not at all.
-George sells a fully depreciated air compressor that cost $975 for $650. The compressor was used to operate air tools.
A)Long-term capital
B)Short-term capital
C)Collectible gain
D)Section 1231
E)Section 1245
F)Section 1250
G)Ordinary income/loss
H)Nontaxable/nondeductible

Question

Quizplus · Accepted Answer

The gain on the sale of a fully depreciated asset used in a business, like an air compressor for operating air tools, is classified as Section 1245 gain. This section recaptures depreciation as ordinary income up to the amount of the gain realized on the sale.

Classify the Gain or Loss on Each of George's Assets