The Gladys Corporation buys equipment (7-year MACRS property) costing $1,114,000(Typo-Should be $1,124,000 to match the amount in problem 48 of chapter 10) on May 12, 2021. In 2024, new and improved models of the equipment make it obsolete, and Gladys sells the old equipment for $34,000 on December 27, 2024.
a. What is the character of Gladys Corporation’s gain or loss on the sale assuming that it takes the maximum cost-recovery deductions allowable on the equipment?
b. What is the character of Gladys Corporation’s gain or loss on the equipment assuming that it takes the minimum cost-recovery deduction allowable on the equipment?