In 2017 you had purchased (for $1M) and placed in service a new widget-making machine (5-year MACRS property). Now youve realized that you really need a bigger/faster machine, so you sold the 2017 machine today for $725,000. Through and including your 2020 tax return, the aggregate total MACRS depre-ciation deductions you will have claimed with respect to the 2017 machines cost is $475,000.

(i) State the (a) amount and (ii) character of the gain or loss you must recognize on your 2020 tax return on these facts.

(ii) Now assume that you sold the 2017 machine today for $1.2M (its value had increased due to a worldwide shortage of widget-making machines). State the (a) amount and (ii) character of the gain or loss you must recognize on your 2020 tax return on these alternative facts.