N purchased a camera for use in his photography business for $1,200.Depreciation of $624 was allowed as a business deduction before the camera was sold.Which of the following is not true?

Question

Quizplus · Accepted Answer

According to the given information, depreciation of $624 was allowed as a business deduction before the camera was sold. Therefore, the adjusted basis of the camera would be $1,200 - $624 = $576.

If the camera is sold for $550, the loss would be $26 (i.e. $550 - $576), and § 1231 applies to the loss. This statement is true.

If the camera is sold for $1,000, the gain would be $424 (i.e. $1,000 - $576), and § 1231 applies to the gain. This statement is also true.

If the camera is sold for $1,300, the gain would be $724 (i.e. $1,300 - $576). Since the camera was used in N's photography business, § 1245 applies to the gain. However, since the asset was held for more than one year, § 1231 also applies to the gain. Therefore, this statement is also true.

However, if the camera is sold for $1,100, then there would be no gain or loss as the sales price is equal to the adjusted basis. In this case, none of the statements in the answer choices would be true.

N Purchased a Camera for Use in His Photography Business