38th Edition

ISBN: 9780357391129

Author: WHITTENBURG

Publisher: Cengage

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Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue autho…

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Textbook Question

Chapter 8, Problem 14MCQ

In 2019, Mary sells for $24,000 a machine used in her business. The machine was purchased on May 1,2017, at a cost of $22,000. Mary has deducted depreciation on the machine of $6,000. What is the amount and nature of Mary's gain as a result of the sale of the machine?

$2,000 Section 1231 gain
$8,000 ordinary income under Section 1245
$6,000 ordinary income and $2,000 Section 1231 gain
$6,000 Section 1231 gain and $2,000 ordinary income under Section 1245
None of the above

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

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Chapter 8 Solutions

Income Tax Fundamentals 2020

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Solution Summary: The author explains Section 1231 assets are depreciable business assets held by a business for more than one year. The gain on sale of these assets is taxed at the lower of capital gain tax and the rate of ordinary

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