Question

Lena is a sole proprietor. In April of this year, she sold equipment purchased four years ago for $53,200 with an adjusted basis of $31,920 for $35,112. Later in the year, Lena sold another piece of equipment purchased two years ago with an adjusted basis of $15,960 for $10,374. What is the amount and character of Lena's gain or loss?

Answer 1

Ordinary gain $3,192; Loss $5,586

Step-by-step explanation:

Calculation to determine the amount and character of Lena's gain or loss

Based on the information given she has an ORDINARY GAIN § 1245 DEPRECIATION RECAPTURE of the amount of $3,192 calculated as ($35,112 − $31,920) from the sale of the first equipment as well as § 1231 LOSS of the amount of $5,586 ($10,374 − $15,960) from the sale of the second equipment.

Therefore the amount and character of Lena's gain or loss will be Ordinary gain of $3,192 and Loss of $5,586.