Question

Several years ago, Nipher paid $70,000 to purchase equipment to use in its business. This year, it sold the equipment for $76,500. Accumulated MACRS depreciation through date of sale was $18,000. Determine the amount and character of Nipher's gain recognized. Group of answer choices $18,000 ordinary gain and $6,500 Section 1231 gain $24,500 Section 1231 gain $18,000 ordinary gain and $6,500 capital gain $24,500 ordinary gain

Answer 1

$18,000 ordinary gain and $6,500 Section 1231 gain

Step-by-step explanation:

Calculation to Determine the amount and character of Nipher's gain recognized.

Based on the information given we were told that the Accumulated MACRS depreciation was the amount of $18,000 which means that the ORDINARY INCOME will be $18,000 as well as $6,500 SECTION 1231 GAIN Calculated as:

Gain= Fair Value of Equipment -Book value of Equipment

Gain=$76,500-$70,000

Gain=$6,500

Therefore the amount and character of Nipher's gain recognized will be $18,000 ordinary gain and $6,500 Section 1231 gain