Question:

For the following sales of the business assets by a proprietorship, determine:

(1) the amount of gain (loss) recognized, and

(2) label the gain or loss as ordinary or Section 1231. For any Section 1231 gain, you must also include the applicable rate.

a. Sale of business equipment for $30,000. The adjusted basis on the date of sale is $18,000 (original cost 1 1/2 years ago was $25,000, the total depreciation taken was $7,000).

b. Sale of business furniture for $35,000. The adjusted basis on the date of sale is $42,000 (original cost 5 years ago was $200,000, the total depreciation taken was $158,000).

c. Sale of business equipment for $45,000. The adjusted basis on the date of sale is $30,000 (original cost 3 years ago was $50,000, the total depreciation taken was $20,000).

d. Sale of a warehouse for $450,000. The adjusted basis on the date of sale is $375,000 (original cost in 2004 was $500,000, total MACRS was $125,000).

e. Sale of a factory building for $600,000. The adjusted basis on the date of sale is $410,000 (original cost in 2007 was $500,000, total MACRS was $90,000).