Use the following to answer questions 1 and 2. Jack Olaf decided to open an accounting practice and furnished his office with furniture previously used in his residence. The fair market value of the furniture on the date of the conversion was $2,000 and his basis was $4,500.

1. What is Jacks depreciable basis in the furniture?

2. Jack Olaf uses the furniture for one year and depreciates the furniture using the MACRS tables in the proper amount of $400. He sells the furniture to his office neighbor for $1700. What is Jacks gain or loss realized on the sale?