The sale of machinery at a loss that was used in a trade or business and held for more than one year results in the following type of loss?
A)Capital.
B)§291.
C)§1231.
D)§1245.
E)None of thesE.Assets used in a trade or business and held for more than one year are §1231 assets and do not require depreciation recapture.

Question

Quizplus · Accepted Answer

When machinery used in a trade or business is sold at a loss and held for more than one year, the resulting loss is classified as a §1231 loss. §1231 assets are assets used in a trade or business and held for more than one year, and they have a special tax treatment where gains are treated as long-term capital gains and losses are treated as ordinary losses. Depreciation recapture is not required for §1231 assets.

The Sale of Machinery at a Loss That Was Used