The sale for more than the original cost basis (before depreciation)of machinery used in a trade or business and held for more than one year results in which of the following types of gain or loss?
A)Capital and ordinary.
B)Ordinary only.
C)Capital and §1231.
D)§1245 and §1231.
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

The sale of machinery used in a trade or business, held for more than one year, and sold for more than its original cost basis results in §1245 recapture (to the extent of depreciation taken or allowable) which is treated as ordinary income, and any gain in excess of the recaptured amount is treated as §1231 gain, which can be capital if the §1231 gains exceed the §1231 losses for the year.

The Sale for More Than the Original Cost Basis (Before