A sole proprietorship purchased an asset for $1,000 in 2017 and its value was $1,500 at the end of 2017.In 2018,the sole proprietorship sold the asset for $1,400.The sole proprietorship realized a taxable gain of $400 in 2018 but an economic loss of $100 in 2018.

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Quizplus · Accepted Answer

The taxable gain is calculated based on the purchase price ($1,000) and the selling price ($1,400), resulting in a $400 gain. The economic loss considers the increase in value to $1,500, so selling at $1,400 results in a $100 loss from the peak value.

A Sole Proprietorship Purchased an Asset for $1,000 in 2017