Jay sold three items of business equipment for a total of $300,000. None of the equipment was appraised to determine its value. Jay’s cost and adjusted basis for the assets are shown below.
|
Asset |
Cost |
Adjusted Basis |
|
Skidder |
$230,000 |
$ 40,000 |
|
Driller |
120,000 |
60,000 |
|
Platform |
620,000 |
–0– |
|
Total |
$970,000 |
$100,000 |
Jay has been unable to establish the fair market values of the three assets. All he can determine is that combined they were worth $300,000 to the buyer in this arm’s length transaction. How should Jay allocate the sales price and figure the gain or loss on the sale of the three assets?