Question

A sole proprietor of a farm implement store sold a truck for $15,000 that had been used to make service calls. the truck cost $30,000 three years ago, and $21,360 depreciation was taken. what is the appropriate classification of the $6,360 gain for tax purposes?
a. section 1231 gain.
b. long-term capital gain.
c. ordinary gain.
d. short-term capital gain

Answer 1

It should be reported as an ordinary gain because the truck is considered as ordinary asset used in the ordinary course of business. The truck was used as service calls apparently used in the normal operation of the company thus the gain on the sale of this asset should be considered as  an ordinary gain.