Question - White Company acquires a new machine for $35,000 and uses it in White's manufacturing operations. A few months after White places the machine in service, it discovers that the machine is not suitable for White's business. White had fully expensed the machine in the year of acquisition using §179. White sells the machine for $5,000 in the tax year after it was acquired, but held the machine only for a total of 13 months. What was the tax status of the machine when it was disposed of and the amount of the gain or loss?
A capital asset and $5,000 gain.
An ordinary asset and $5,000 gain.
A §1231 asset and $5,000 gain.
A §1231 asset and $5,000 loss.
Copper Corporation sold machinery for $27,000 on December 31, 2015. The machinery had been purchased on January 2, 2012, for $30,000 and had an adjusted basis of $21,000 at the date of the sale. For 2015, what should Copper Corporation report?
Ordinary income of $6,000.
A §1231 gain of $3,000 and $3,000 of ordinary income.
A §1231 gain of $6,000.
A §1231 gain of $6,000 and $3,000 of ordinary income.