Question

Taxpayer sells office furniture for $20,000. The taxpayer originally paid $32,000 for the furniture and had taken $17,000 in depreciation. What is the taxpayer's gain or loss on the sale of the furniture?

Answer 1

The taxpayer incurred a loss of $5,000 on the sale of the furniture.

Explanation:

To calculate the taxpayer's gain or loss on the sale of the furniture, subtract the adjusted basis from the selling price. The adjusted basis is the original cost minus accumulated depreciation. In this case, the adjusted basis is ($32,000 - $17,000) = $15,000. The selling price was $20,000. Therefore, the taxpayer's loss is $20,000 - $15,000 = $5,000, indicating a loss of $5,000 on the sale.

The gain or loss on the sale of an asset is determined by subtracting the adjusted basis from the selling price. Here, the taxpayer originally paid $32,000 for the furniture and claimed $17,000 in depreciation. The adjusted basis is calculated by subtracting the depreciation ($17,000) from the original cost ($32,000), resulting in an adjusted basis of $15,000. Upon selling the furniture for $20,000, the taxpayer's loss is derived by subtracting the adjusted basis from the selling price, resulting in a $5,000 loss.

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