Question

Sydney operates a small business. She sold some equipment used in her business for 7,500. The equipment had an adjusted basis of8,000. How will this transaction impact Sydney's tax liability?

Answer 1

Sydney's tax liability may decrease as a result of selling the equipment used in her business, depending on her individual circumstances and tax regulations.

Step-by-step explanation:

The transaction where Sydney sold the equipment used in her business will impact her tax liability as follows:

1. Loss on sale = Adjusted basis - Sales price = $8,000 - $7,500 = $500
2. The loss can be deducted from Sydney's taxable income, reducing her tax liability.
3. However, the deduction for the loss may be subject to certain limitations and rules set by the tax authorities.

Overall, the transaction may result in a decrease in Sydney's tax liability, but the specific impact would depend on her individual circumstances and the tax regulations in place.