Reference no: EM132675957

Problem - Gary Farmer had the following sales of business property during the 2019 tax year:

1. Sold land acquired on December 3, 2008, at a cost of $24,000, for $37,000 on January 5, 2019. The cost of selling the land was $500, and there was no depreciation allowable or capital improvements made to the asset over the life of the asset.

2. Sold a business computer with an adjusted basis of $20,700 that was acquired on April 5, 2016. The original cost was $25,875, and accumulated depreciation was $5,175. The computer was sold on May 2, 2019, for $14,000, resulting in a $6,700 loss.

3. Sold equipment on July 22, 2019 for gross proceeds of $16,000. The equipment was acquired on October 21, 2018 at a cost of $25,000 and accumulated depreciation was $4,300 at the time of the sale. Gary used an equipment broker on this sale and paid a sales commission of $1,600.

Required - Calculate Gary's net gain or loss and determine the character as either capital or ordinary (ignore any depreciation recapture).