Reference no: EM133079724

Question - In 2021, the taxpayer sold machinery used in its business for several years for its fair value of 160,000 to an unrelated party who agreed to pay 40,000 in 2021 and then 40,000 per year (plus adequate interest) in June of the next three (3) years. The machinery had an initial basis of $110,000 and accumulated depreciation of 57200 through the date of sale. Determine the amount and character of the gain taxpayer must recognized in 2021 under the installment method.

A. $69700 total gain comprised of $57200 in section 1245 recapture and 12500 in section 1231 gain

B. 107,200 total comprised of 57200 in section 1245 recapture and 50,000 in section 1231 gains

C. $26800 in section 1231 gain

D. $26800 in total gain comprised of 21343 section 1245 recapture and 5457 in section 1231 gain

E. $0