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How should Jay allocate the sales price

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Problem - Jay sold three items of business equipment for a total of $300,000. None of the equipment was appraised to determine its value. Jay's cost and adjusted basis for the assets are shown below.

Asset

Cost

Adjusted Basis

Skidder

$230,000

$40,000

Driller

120,000

60,000

Platform

620,000

-0-

Total

$970,000

$100,00

Jay has been unable to establish the fair market values of the three assets. All he can determine is that combined they were worth $300,000 to the buyer in this arm's length transaction. How should Jay allocate the sales price and figure the gain or loss on the sale of the three assets?

Reference no: EM132660426

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