Firm J$,$ an accrual basis taxpayer, recorded a $$40,000$ account receivable on the sale of an asset on credit. Its basis in the asset was $$33,000.$ Two months after the asset sale, Firm J sold the receivable to a local bank for $$38,000.$

Required:

Assuming that the asset was an inventory item, determine the amount and character of Firm J$$s gain or loss recognized on the sale of:

$1.$ the asset and

$2.$ the receivable.

Assuming that the asset was a capital asset, determine the amount and character of Firm J$$s gain or loss recognized on the sale of:

$1.$ the asset and

$2.$ the receivable.