A sole proprietorship purchased an asset for $1,000 in 2015 and its value was $1,500 at the end of 2015.In 2016,the sole proprietorship sold the asset for $1,400.The sole proprietorship realized a taxable gain of $400 in 2016 but an economic loss of $100 in 2016.

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The taxable gain is calculated by subtracting the original cost of the asset ($1,000) from the selling price ($1,400), resulting in a gain of $400. However, the economic loss is calculated by subtracting the ending value of the asset at the end of 2015 ($1,500) from the selling price ($1,400), resulting in a loss of $100. So, the sole proprietorship realized a taxable gain of $400 in 2016 but an economic loss of $100 in 2016.

A Sole Proprietorship Purchased an Asset for $1,000 in 2015