Juanita is a sole proprietor who has some outstanding receivables she wishes to sell.The receivables have a $16,000 FMV and a basis of $10,000.Juanita sells the receivables for $12,500.What gain or loss does Juanita recognize on the sale?
A)$3,500 capital loss.
B)$2,500 ordinary gain.
C)$2,500 capital gain.
D)$3,500 ordinary loss.

Question

Quizplus · Accepted Answer

Juanita recognizes a $2,500 ordinary gain, calculated as the difference between the sale price ($12,500) and the basis ($10,000) of the receivables. Receivables are considered ordinary income property, so the gain is ordinary, not capital.

Juanita Is a Sole Proprietor Who Has Some Outstanding Receivables