On August 1 of year 0, Dirksen purchased a machine for $20,000 to use in its business.

Question:

On August 1 of year 0, Dirksen purchased a machine for $20,000 to use in its business. On December 4 of year 0, Dirksen sold the machine for $18,000.
a. What is the amount and character of the gain or loss Dirksen will recognize on the sale?
b. What is the amount and character of the gain or loss Dirksen will recognize on the sale if the machine was sold on January 15 of year 1 instead?