McGraw-Hill's Taxation of Business Entities 3rd Edition by Connie Weaver, Brian Spilker, Edmund Outslay, John Robinson, Ronald Worsham, Benjamin Ayers, John Barrick

Exercise 21

In year 0, Longworth Partnership purchased a machine for $40,000 to use in its business. In year 3, Longworth sold the machine for $35,000. Between the date of the purchase and the date of the sale, Longworth depreciated the machine by $22,000.
a. What is the amount and character of the gain Longworth will recognize on the sale
b. What is the amount and character of the gain Longworth will recognize on the sale if the sale proceeds were increased to $45,000
c. What is the amount and character of the gain Longworth will recognize on the sale if the sale proceeds were decreased to $15,000