Problem NO: 8

On August 1 of year 0, Dirksen purchased a machine for $20,000 to use in its business. On December 4 of year 0, Dirksen sold the machine for $18,000.\n

On August 1 of year 0, Dirksen purchased a machine for $20,000 to use in its business. On December 4 of year 0, Dirksen sold the machine for $18,000.

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a. What are the amount and character of the gain or loss Dirksen will recognize on the sale? 

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b. Dirksen depreciated the machinery using MACRS (seven-year recovery period). What are the amount and character of the gain or loss Dirksen will recognize on the sale if the machine was sold on January 15 of year 1 instead? 

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