In year 0, Javens Inc. sold machinery with a fair market valueof $630,000 to Chris. The machinery’s original basis was $493,920and Javens’s accumulated depreciation on the machinery was $73,000,so its adjusted basis to Javens was $420,920. Chris paid Javens$63,000 immediately (in year 0) and provided a note to Javensindicating that Chris would pay Javens $94,500 a year for six yearsbeginning in year 1.
- What is the amount and character of the gain that Javens willrecognize in year 0?
- What amount and character of the gain will Javens recognize inyears 1 through 6?
