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In year 0, Javens Inc. sold machinery with a fair market value of $630,000 to Chris....

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Accounting

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.

  1. What is the amount and character of the gain that Javens willrecognize in year 0?
  2. What amount and character of the gain will Javens recognize inyears 1 through 6?

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