Sumner sold equipment that it uses in its business for $30,700. Sumner bought the equipment a few years ago for $79,650 and has claimed $39,825 of depreciation expense. Assuming that this is Sumner's only disposition during the year, what is the amount and character of Sumner's gain or loss?
A) $9,125 §1231 loss.
B) $9,125 §1245 loss.
C) $48,950 ordinary loss.
D) $9,125 capital loss.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

The equipment is a §1245 property. The gain is the excess of the amount realized ($30,700) over the adjusted basis ($79,650 - $39,825 = $39,825). The gain is $9,125 and is a §1245 loss.

Sumner Sold Equipment That It Uses in Its Business for $30,700