1. On July 6, 2021, Asphalt Inc. sold a machine that has been used in its road paving operation. The machine was purchased on May 10, 2016, for $1,450,000. Asphalt Inc. sold the machine for $1,550,000 receiving $125,000 cash and a $1,425,000 note receivable.

The note receivable bears an adequate interest rate and the first principal payment will be made in 2022 on the note.

Asphalt Inc. would like to recognize the least amount of gain possible for 2021 from the sale of the machine.

Regular Tax
	Purchase			adjusted		adjusted
	Date	Cost	179	basis	168(k)	basis
machine	5/10/2016	1,450,000	-	1,450,000	725,000	725,000

0.1429	0.2449	0.1749	0.1249	0.0893	0.0892
MACRS	MACRS	MACRS	MACRS	MACRS	MACRS	accumulated
2016	2017	2018	2019	2020	2021	depreciation
103,603	177,553	126,803	90,553	64,743	64,670	1,352,923

The above depreciation schedule does not take into account the machine being sold in 2021.

Calculate the gain/loss realized, recognized and the character of that gain/loss.