Ford purchased material handling equipment for its Fusion (car) assembly line on November 19, 2018 for $45,000. It later sold the equipment on April 15, 2020 after posting a $1,000 advertisement in a manufacturing magazine with the details on the equipment for sale. The buyer paid $27,000 in cash for the handling equipment. Assume the depreciation able to be claimed for the equipment was $4,000, $6,000, and $6,000 in 2018, 2019, and 2020, respectively. Further, assume the company had no prior unrecaptured net Sec. 1231 losses in years 2015-2019. (total of 30 points possible: 10 points each)

a. What was the amount and character of the gain (or loss) Ford will recognize on the sale? If there is more than one type of character (e.g. part is treated as ordinary gain (loss) and part is treated as long-term capital gain (loss)), please say the dollar amount related to each type of character (e.g. $50,000 ordinary gain and $50,000 long-term capital gain).

b. What was the amount and character of the gain (or loss) Ford will recognize on the sale if the amount of cash paid by the buyer changed to $35,000 instead? As with the above, if there is one that one type of character, state the dollar amount of gain (loss) related to each type of character.

c. What was the amount and character of the gain (or loss) Ford will recognize on the sale if the amount of cash paid by the buyer changed to $50,000 instead? As with the above, if there is one that one type of character, state the dollar amount of gain (loss) related to each type of character.

Answer rating: 100% (QA)

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