41. Copper Corporation sold machinery for $47,000 on December 31, 2014. The machinery had been purchased on January 2, 2011, for $60,000 and had an adjusted basis of $41,000 at the date of the sale. For 2014, what should Copper Corporation report?
A) Ordinary income of $6,000.
B) A § 1231 gain of $3,000 and $3,000 of ordinary income.
C) A § 1231 gain of $6,000.
D) A § 1231 gain of $6,000 and $3,000 of ordinary income.
E) None of these.

Question

41.	Copper Corporation sold machinery for $47,000 on December 31, 2014. The machinery had been purchased on January 2, 2011, for $60,000 and had an adjusted basis of $41,000 at the date of the sale. For 2014, what should Copper Corporation report?
A)	Ordinary income of $6,000.
B)	A § 1231 gain of $3,000 and $3,000 of ordinary income.
C) A § 1231 gain of $6,000.
D)	A § 1231 gain of $6,000 and $3,000 of ordinary income.
E)	None of these.

Quizplus · Accepted Answer

The recognized gain from the disposition of the machinery is $6,000 ($47,000 sale price - $41,000 adjusted basis).Since the recognized gain is less than the depreciation taken of $19,000 ($60,000 cost - $41,000 adjusted basis)and the asset is depreciable equipment used in a business,§ 1245 depreciation recapture applies.

41 Copper Corporation Sold Machinery for $47,000 on December 31, 2014