Question

1. A business machine purchased April 1, 2015, for $108,000 was fully depreciated in 2015 using § 179 immediate expensing. On August 15, 2017, the machine was sold for $77,000. What is the amount and nature of the gain or loss from disposition of the machine?

Answer 1

ANSWER :

Capital gain under section 50 in the case of depreciable assets  if an assessee has sell/sold a capital asset having part of block of assets (building, machinery etc) on which the depreciation has been allowed under Income Tax Act,then has been income arising from such capital asset is treated as short term capital gain.

Whole of the capital assets having part of block of assets have been sold during a year and the assessee have a profit after deducting the net sale consideration from the written down value of the block of assets then such profit shall be treated as short term capital gain and no depreciation shall be allowed from such block of assets.

In our case there is only machine in block of assets and there deprecition has been charged in the same year,so block of assets nil. If that assets has been sold any of year then short term capital gain should be taken in your books because there is no block of assets.

So, $77,000 his short term capital gain because he take full amount claim as depreciation and assets value is nil.