[Manuelo]

A taxpayer trades in an old automobile used solely for business for another automobile to be used for business.

Old automobile – Cost: $35,000. Depreciation: $18,000

New automobile: $16,500. Trailer in addition to new auto: $3,500

Realized gain: $3,000

Gain Recognized: $3,000

My question is: since it is an asset used for business, is the gain recognized a Section 1245 or Section 1231 gain?

[forever4]

Keep in mind that sec 1245 is = depreciation and the remaining gain should b sec 1231. And sec 1231 is tax as cap gain with special cap gain treatment. Remember in corp cap gain tax rate is the same as ord inc. I believe for sec 1231 you get special rate.

FAR 5/14 88 PASSED!
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REG retake 11/29 -> 89!!!!!!!!!!!!!!!!!!!
BEC 10/11/12 -> 84!!!!!!!!!!!!!
AUD 10/25/12 -> 95!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

I'm DONE! OMG 8 months of hard work.

I SHALL PASS. BECAUSE IT'S ME, SO EVERYTHING WILL BE OK!

[Manuelo]

So here, the $3,000 is a Section 1245 gain which is actually ordinary income. Correct?

[StudyHarder]

Yes, this would be Section 1245 = Personalty.

REG - 11/12 - 87
BEC - 12/12 - 84
AUD - 5/13 - 97
FAR - 8/13 - 84

Ethics - DONE

Class of 2012 - 2013

Sending in License as we speak!

[Author]

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