Potomac Corporation wants to sell a piece of machinery that it has used in its business for 10 years. The facts are as follows:

Cash Received from buyer 40,000

Buyer assumes unpaid note payable on machinery 5000

Note payable is liability on the machinery

Cost basis 60,000

Accumulated Depreciation 40,000

a. What is the amount realized

b. What is the realized gain

c. Is the above asset considered sec. 1250 or 1245 property?

d. If sec 1245 property then what is the amount of the depreciation recapture? Is this depreciation recapture considered an ordinary gain or a sec. 1231 gain

e. If sec. 1245 property then is there any remaining gain after any depreciation recapture?

Same facts as problem #1 but in addition Potomac Corporation also sells a warehouse used in business. Potomac Corporation sells two assets in total machinery from problem #1 and a warehouse. Ignore sec. 1250 depreciation recapture for the purpose of this problem.

Warehouse Selling price 200,000

Basis is. 100,000 (after accumulated depreciation)

a. What is the total ordinary gain realized by Potomac Corporation?

b. What is the total sec. 1231 gain realized by Potomac Corporation?

c. If Potomac Corporation has $100,000 of sec. 1231 look back losses that could be used to offset their sec. 1231 gains then whatis the adjusted amount of sec. 1231 gains recognized by Potomac Corporation?