Sumner sold equipment that it uses in its business for $30,000. Sumner bought the equipment a few years ago for $80,000 and has claimed $40,000 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?

Question

Quizplus · Accepted Answer

The adjusted basis of the equipment is $40,000 ($80,000 original cost - $40,000 depreciation). The sale price is $30,000, resulting in a $10,000 loss ($30,000 - $40,000). Since the equipment is used in business and held for more than a year, the loss is a §1231 loss.

Sumner Sold Equipment That It Uses in Its Business for $30,000