Tom Truman sells a business machine which he has owned for four years for $27,000. Tom purchased the machine for $42,000 and has taken $18,000 in depreciation. How much and what type of gain will result from this sale?

Question

Quizplus · Accepted Answer

the machine is Section 1245 property and so the amount recaptured as ordinary income is the lesser of the total depreciation of $18,000 or the realized gain of $3,000 ($27,000 − $24,000 basis).

Tom Truman Sells a Business Machine Which He Has Owned