Joe Taxpayer plans to sell the business assets that he used in his trade or business. The items being sold are included in the following table. The column Original Cost is the price that Joe paid to acquire the asset. Adjusted Basis after Tax Depreciation is the basis reduced for depreciation expense already taken on the asset. FMV @ Time of Sale & Purchase Price is the amount that a buyer pays Joe for the asset. For purposes of this question, assume that Joe does not operate as a corporation. Please review the table that follows and then answer the questions that follow.

ASSET ORIGINAL COST ADJUSTED TAX BASIS AFTER DEPRECIATION FMV @ TIME OF SALE & PURCHASE PRICE

INVENTORY

MACHINERY

BUILDING

Inventory

a Does Joe have loss on the sale? If so how much and how did you calculate it

b Is the loss an ordinary or capital loss? Please explain why.

Machinery

a Does Joe have a gain on the sale? If so how much and how did you calculate the gain?

b Is the gain ordinary income, capital gain, or some income that fits into each category? Explain why and describe the application of sections  and to the sale of the machinery.

Building

a Does Joe have a gain on the sale? If so how much and how did you calculate the gain?

b Is the gain ordinary income, capital gain, or some income that fits into each category? Explain why and describe the application of sections  and to the sale of the building.