Here is a problem to review. Please review and post a comment about a concept, computation or other thought about thetax principle related to the problem.Hope this is helpful.

In year 0, Canon purchased a machine to use in its business for $56,000. In year 3, Canon sold the machine for $42,000. Between the date of the purchase and the date of the sale, Canon depreciated the machine by $32,000.

a. What is the amount and character of the gain or loss Canon will recognize on the sale, assuming that it is a partnership?

b. What is the amount and character of the gain or loss Canon will recognize on the sale, assuming that it is a corporation?

c. What is the amount and character of the gain or loss Canon will recognize on the sale, assuming that it is a corporation and the sale proceeds were increased to $60,000?

d. What is the amount and character of the gain or loss Canon will recognize on the sale, assuming that it is a corporation and the sale proceeds were decreased to $20,000?

a. $18,000 ordinary income, computed as follows: