Question

lena is a sole proprietor. in april of this year, she sold equipment purchased four years ago for $58,800 with an adjusted basis of $35,280 for $38,808. later in the year, lena sold another piece of equipment purchased two years ago with an adjusted basis of $17,640 for $11,466. what are the tax consequences of these tax transactions?

Answer 1

Lena, a sole proprietor, will have a taxable gain from the first equipment sale and a deductible loss from the second equipment sale.

Step-by-step explanation:

The tax consequences of these transactions for Lena, a sole proprietor, involve the sale of two pieces of equipment. For the first equipment, which had an adjusted basis of $35,280 and was sold for $38,808, Lena made a gain of $38,808 - $35,280 = $3,528. This gain will be included in Lena's taxable income for the year.

For the second equipment, which had an adjusted basis of $17,640 and was sold for $11,466, Lena made a loss of $17,640 - $11,466 = $6,174. This loss can be deducted from Lena's taxable income.

Overall, Lena's taxable income for the year will be increased by the gain from the first equipment sale and reduced by the loss from the second equipment sale.