Juanita is a sole proprietor who has some outstanding receivables she wishes to sell.The receivables have a $16,000 FMV and a basis of $10,000.Juanita sells the receivables for $12,500.What gain or loss does Juanita recognize on the sale?

Question

Quizplus · Accepted Answer

The gain recognized by Juanita is calculated as the difference between the selling price ($12,500) and the basis of the receivables ($10,000), which equals $2,500. Since the receivables are considered ordinary assets in the course of her business, the gain is classified as ordinary.

Juanita Is a Sole Proprietor Who Has Some Outstanding Receivables