Gary Farmer had the following Section 1231 gains and losses during the 2016 tax year:

Sold land acquired on December 3, 2005, at a cost of $24,000, for $37,000 on January 5, 2016. The cost of selling the land was $500, and there was no depreciation allowable or capital improvements made to the asset over the life of the asset.

1. Sold a business computer with an adjusted basis of $20,700 that was acquired on April 5, 2013. The original cost was $25,875, and accumulated depreciation was $5,175. The computer was sold on May 2, 2018, for $14,000, resulting in a $6,700 loss.
2. Sold equipment on July 22, 2018 for gross proceeds of $16,000. The equipment was acquired on October 21, 2017 at a cost of $25,000 and accumulated depreciation was $4,300 at the time of the sale. Gary used an equipment broker on this sale and paid a sales commission of $1,600.

Calculate Gary’s net gain or loss and determine the character as either capital or ordinary (ignore any depreciation recapture).

	Amount of Gain or Loss	Gain or Loss
Land	$____________	Gain
Computer	$___________	Loss
Equipment	$____________	Loss

The land and computer are Section 1231 properties, resulting in a net Section 1231 gain of $. This is treated as a net long-term capital gain . The equipment is treated as an ordinary asset . As such it results in an ordinary loss of $._______________

Answer rating: 100% (QA)

4797 Sales of Business Property Also Involuntary Conversions and Recapture Amounts Under Sections 17... View the full answer