Taxpayer used Asset A in his business for many years. Taxpayer bought Asset A for $20,000 many years ago.

Over the years (through the date of sale), Taxpayer properly took depreciation deductions of $16,000 on Asset A. This year, Taxpayer sells A for $22,000 cash and the buyer assumes responsibility for a $1,000 debt that Taxpayer owes the bank. The debt is secured by Asset A.

Answer the following, and indicate clearly which sub-part you are answering (A, B, C, etc.) 

A. What is Taxpayer's AMOUNT REALIZED on the sale?

B. What is Taxpayer's total REALIZED GAIN OR LOSS on the sale?

C. Assume Asset A is a building. What is the character of the gain or loss on the sale? (Be sure to note what part of the gain or loss is capital, ordinary, 1231, 1245, or Unrecaptured 1250).

D. Assume Asset A is a piece of machinery. What is the character of the gain or loss on the sale? (Be sure to note what part of the gain or loss is capital, ordinary, 1231, 1245, or Unrecaptured 1250). 

Answer rating: 100% (QA)

Taxpayer used Asset A in his business for many years Taxpayer bought Asset A for 20000 many years ago Over the years through the date of sale Taxpayer ... View the full answer