Jake purchased a $300,000 earthmover for his business.He sold the earthmover for $245,000 after taking $210,000 of depreciation.What is the nature and amount of the gain or loss on the sale?

Question

Quizplus · Accepted Answer

The gain on the sale is calculated as the selling price ($245,000) minus the adjusted basis (original cost $300,000 minus depreciation $210,000 = $90,000 adjusted basis), which equals $155,000. Since the asset is depreciable property used in a business and the gain is due to depreciation recapture, it is classified as Section 1245 ordinary income.

Jake Purchased a $300,000 Earthmover for His Business