Question

Copper Corporation sold machinery for $47,000 on December 31, 2019. The machinery had been purchased on January 2, 2016, for $60,000 and had an adjusted basis of $41,000 at the date of the sale. For 2019, what should Copper report?

A. Ordinary income of $6,000.
B. A § 1231 gain of $3,000 and $3,000 of ordinary income.
C. A § 1231 gain of $6,000.
D. A § 1231 gain of $6,000 and $3,000 of ordinary income.
E. None of these.

Answer 1

A.Ordinary income of $6,000

Step-by-step explanation:

For 2019, copper should report an ordinary income of $ 6000

Purchase price of the machinery was $ 60,000.00

Adjusted basis is the book value which is $ 41,000.00

Sold at $ 47,000.00

Gain or loss= selling price - book value.

= $ 47,000- $41,000

= $ 6000

The transaction results in a profit of $ 6000