Wally Inc. sold the following three personal property assets in Year 6:
Asset Purchase Date Cost Accumulated Depreciation Selling Price
A 5/1/Year 3 $5,000 $3,000 $2,300
B 8/13/Year 4 $1,200 $500 $2,000
C 2/18/Year 4 $3,800 $1,800 $1,500
What is Wally’s net Section 1231 gain or loss in Year 6?
A. $500 loss
B. $300 gain
C. $800 gain
D. $1,600 gain
Explanation
Choice “B” is correct. All of these assets are Section 1231 assets. The gains and losses
are as follows:
Asset Selling Price
Adjusted Basis
Cost—A/D Gain/(Loss)
1245
Recapture 1231 Gain/(Loss)
A $2,300 $2,000 $300 $300 $0
B $2,000 $700 $1,300 $500 $800
C $1,500 $2,000 ($500) $0 ($500)
Each of the gains are subject to Section 1245 recapture up to the accumulated
depreciation. The remaining gains and all losses are Section 1231. The net Section
1231 is a $300 gain ($0 + $800 – $500).
Graduated 05/2016.
NY CPA Candidate.
Public accounting.
FAR COMING UP 07/07/2016 !! GOD HELP ME.
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