Benson Company purchased a drill press on November 13,2013,at a cost of $30,000.Benson sells the drill press on January 3,2017,for $16,000.Regular MACRS depreciation on the drill press would be $18,500,while straight-line MACRS depreciation would total $12,000.
I.If Benson used regular MACRS depreciation,it would have a Section 1231 gain of $4,500.
II.If Benson used straight-line depreciation,it would have a Section 1231 loss of $2,000.
III.If Benson used regular MACRS depreciation,it would have Section 1245 ordinary income of $4,500.
IV.If Benson used straight-line depreciation,it would have an ordinary loss of $4,500.

Question

Benson Company purchased a drill press on November 13,2013,at a cost of $30,000.Benson sells the drill press on January 3,2017,for $16,000.Regular MACRS depreciation on the drill press would be $18,500,while straight-line MACRS depreciation would total $12,000.
I.If Benson used regular MACRS depreciation,it would have a Section 1231 gain of $4,500.
II.If Benson used straight-line depreciation,it would have a Section 1231 loss of $2,000.
III.If Benson used regular MACRS depreciation,it would have Section 1245 ordinary income of $4,500.
IV.If Benson used straight-line depreciation,it would have an ordinary loss of $4,500.
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Quizplus · Accepted Answer

If Benson used straight-line depreciation, the adjusted basis would be $18,000 ($30,000 - $12,000), resulting in a Section 1231 loss of $2,000 ($18,000 - $16,000). If Benson used regular MACRS depreciation, the adjusted basis would be $11,500 ($30,000 - $18,500), resulting in Section 1245 ordinary income of $4,500 ($16,000 - $11,500).

Benson Company Purchased a Drill Press on November 13,2013,at a Cost