The following table describes the § 1231 assets sold by Tan Company (a sole proprietorship) this year. Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year. Assume that there is a § 1231 lookback loss of $14,000.
AssetAcquired
Sold
Cost
Depreciation
Sale Price
Stamping machine3/10/15
8/10/19
$40,000
$29,736
$ 2,000
Factory building2/12/12
7/23/19
80,000
18,838
90,000
Tractor5/16/14
11/13/19
52,000
52,000
60,000
Overhead crane11/12/08
2/25/19
74,000
74,000
18,000
?
What will be an ideal response?
The stamping machine is sold at a $8,264 loss, which is a § 1231 loss. The factory building yields a § 1231 gain of $28,838. There is no § 1250 depreciation recapture because straight-line depreciation was used (i.e., the building was placed in service after 1986). The tractor has $60,000 of gain, $52,000 of ordinary gain due to § 1245 depreciation recapture (equal to the deprecation taken) and $8,000 of § 1231 gain. The $18,000 gain on the overhead crane is ordinary due to § 1245 depreciation recapture. Of the net § 1231 gain, $14,574 ($28,838 + $8,000 – $8,264 – $14,000 § 1231 lookback loss) is treated as long-term capital gain. The following table provides details on the computations:?
| Asset | Acquired | Sold | Cost | Depreciation | Basis | Sale Price | Gain (Loss) |
| Stamping machine | 3/10/15 | 8/10/19 | $40,000 | $29,736 | $10,264 | $2,000 | ($ 8,264) |
| Factory building | 2/12/12 | 7/23/19 | 80,000 | 18,838 | 61,162 | 90,000 | 28,838 |
| Tractor | 5/16/14 | 11/13/19 | 52,000 | 52,000 | –0– | 60,000 | 60,000 |
| Overhead crane | 11/12/08 | 2/25/19 | 74,000 | 74,000 | –0– | 18,000 | 18,000 |
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