Create Corp had machinery and equipment with the cost basis of $50,000 in 2020 fully used in the business. They took the 100% special bonus depreciation in the first year, therefore the written down value is zero. During the current year, they sold this machinery for $35,000. What is the taxable Gain/Loss from the sale of machinery?
Question
Create Corp had machinery and equipment with the cost basis of 35,000. What is the taxable Gain/Loss from the sale of machinery?
Solution
The taxable gain or loss from the sale of machinery is calculated by subtracting the written down value of the machinery from the sale price.
Step 1: Identify the sale price of the machinery. In this case, the machinery was sold for $35,000.
Step 2: Identify the written down value of the machinery. The written down value is the cost basis minus any depreciation. In this case, Create Corp took the 100% special bonus depreciation in the first year, so the written down value is $0.
Step 3: Subtract the written down value from the sale price to calculate the taxable gain or loss. In this case, 0 (written down value) = $35,000.
Therefore, the taxable gain from the sale of the machinery is $35,000.
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