1. Bob Tettor, a sole proprietor, sold office equipment in January Year 3 for $2,000 which had been used in his business. Additional information follows:

Purchase date: January 1, Year 1

Original Cost: $1,800

Depreciation under MACRS $1,044

Straight-line depreciation would have been $900

Bob should recognize gain on the sale of the equipment as:

1. $1,244 ordinary income $-0- Sec. 1231 gain
2. $344 ordinary income $900 Sec. 1231 gain
3. $1,044 ordinary income $200 Sec. 1231 gain
4. $900 ordinary income $144 Sec. 1231 gain
5. None of these.