Blue Company sold machinery for $45,000 on December 23, 2017. The machinery had been acquired on April 1, 2015, for $69,000 and its adjusted basis was $34,200. The § 1231 gain, § 1245 recapture gain, and § 1231 loss from this transaction are:
A)$0 § 1231 gain, $10,800 § 1245 recapture gain, $0 § 1231 loss.
B)$0 § 1231 gain, $0 § 1245 recapture gain, $14,800 § 1231 loss.
C)$0 § 1231 gain, $34,200 § 1245 recapture gain, $0 § 1231 loss.
D)$0 § 1231 gain, $10,800 § 1245 recapture gain, $34,200 § 1231 loss.
E)None of the above.

Question

Quizplus · Accepted Answer

The § 1245 recapture gain is calculated as the lesser of the depreciation taken ($34,800) or the gain realized ($10,800). Since the sale price ($45,000) is greater than the adjusted basis ($34,200), there is no § 1231 loss or gain.

Blue Company Sold Machinery for $45,000 on December 23, 2017