Beth had been using an automobile for personal purposes. In year 2, when she started a business, she began to use the car exclusively for this business at a time when it was worth $12,000. She had purchased the auto in year 1 for $16,000.

a. Assuming that she takes $3,000 of depreciation on the auto and then sells it, how much gain or loss does she have and what is its character if the amount realized is $8,000?

b. How would your answer change if she realizes $14,000?

AppendixLO1