Troy Company purchased a printing press on April 13, 2015 at a cost of $30,000. Troy sells the printing press on January 3, 2018 for $16,000. Regular MACRS depreciation on the printing press would be $18,500, while straight-line MACRS depreciation would total $12,000.
I.If Troy used straight-line depreciation, it would have a Section 1231 loss of $2,000.
II.If Troy used regular MACRS depreciation, it would have Section 1245 ordinary income of $4,500.

Question

Troy Company purchased a printing press on April 13, 2015 at a cost of $30,000. Troy sells the printing press on January 3, 2018 for $16,000. Regular MACRS depreciation on the printing press would be $18,500, while straight-line MACRS depreciation would total $12,000.
I.If Troy used straight-line depreciation, it would have a Section 1231 loss of $2,000.
II.If Troy used regular MACRS depreciation, it would have Section 1245 ordinary income of $4,500.
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Quizplus · Accepted Answer

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

Troy Company Purchased a Printing Press on April 13, 2015