Income tax

Question 6 (2 points)

A single taxpayer sells 3,000 shares of Section 1244 stock ("small business corporation" stock) at a loss of $125,000. How will this loss be treated on the tax return?

Question 6 options:

	$125,000 ordinary loss
	$125,000 capital loss
	$50,000 ordinary loss and $75,000 capital loss
	$100,000 ordinary loss and $25,000 capital loss
	None of the above

---------------------------------------------------------------------------------------------------------------------------------------------

Question 7 (2 points)

A taxpayer purchased business machinery on February 16, 2013, for $25,000. The machinery was sold for $26,000 on November 10, 2014. Depreciation information is as follows:

	Accelerated depreciation taken	$9,000
	Straight-line depreciation (7-year life) would have been	5,000

What is the gain or loss on the sale of this machinery, and how will it be treated on the tax return?Question 7 options:

	$4,000 ordinary income and $6,000 Section 1231 gain
	$4,000 ordinary income and $6,000 long-term capital gain
	$9,000 ordinary income and $1,000 Section 1231 gain
	$9,000 ordinary income and $1,000 long-term capital gain
	None of the above.