Michael Sold Machinery Used in His Business for $50,000

Multiple Choice

Michael sold machinery used in his business for $50,000. He purchased the equipment three years ago for $55,000 and deducted $22,800 MACRS depreciation through the date of sale. Compute and characterize Michael's gain on sale.

A) $17,800 Section 1231 gain
B) $22,800 ordinary gain and $5,000 Section 1231 loss
C) $17,800 ordinary gain
D) $17,800 capital gain