Tara purchased a machine for $40,000 to be used in her business.The cost recovery allowed and allowable for the three years the machine was used are as follows: If Tara sells the machine after three years for $15,000, how much gain should she recognize?

Question

Tara purchased a machine for $40,000 to be used in her business.The cost recovery allowed and allowable for the three years the machine was used are as follows:  If Tara sells the machine after three years for $15,000, how much gain should she recognize?

Quizplus · Accepted Answer

To calculate the gain, we need to subtract the adjusted basis (cost - cost recovery) from the selling price:
$15,000 - ($40,000 - $12,840) = $3,480
Therefore, Tara should recognize a gain of $3,480. Option D is the correct answer.

Tara Purchased a Machine for $40,000 to Be Used in Her