LO3 Hannibal owns a farm. He purchases a tractor in 2006 at a cost of $25,000.

Because 2006 is a bad year, he does not deduct any depreciation on the tractor in 2006. He sells the tractor in 2010 for $16,000. He takes straight-line depreciation on the tractor of $12,500 for the years 2007 to 2010. The total allowable straight-line depreciation for the tractor for 2006 to 2010 is $15,000. What is Hannibal’s gain or loss on the sale of the tractor? Explain.