When Janet Maple sold her apple orchard, what was the correct ordinary income amount she needed to report?

Study for the 43-Hour Federal Qualifying Education Test. Engage with flashcards and multiple-choice questions, each with hints and explanations. Prepare thoroughly for your exam!

To determine the correct ordinary income amount that Janet Maple needed to report from the sale of her apple orchard, it is essential to understand how income from the sale of business property is classified for tax purposes. Generally, when a taxpayer sells an asset used in a trade or business, the income from that sale must be reported as ordinary income to the extent of any depreciation taken on that asset.

In this scenario, the amount reported as ordinary income often reflects the difference between the asset's adjusted basis (which typically includes initial cost plus improvements minus depreciation) and its selling price. The ordinary income component specifically arises from any recapture of depreciation. If Janet had taken depreciation deductions over the years while operating her orchard, that portion of the sale proceeds would be considered ordinary income.

Given that the reported ordinary income amount is $6,000, this suggests that either Janet's sale profits, when calculated against her basis and depreciation recapture, yielded this specific amount as taxable income. The other amounts presented in the choices did not accurately reflect the correct calculation of the ordinary income for her particular scenario. Hence, the answer of $6,000 accurately represents the outcome of her tax reporting requirements following the sale of her orchard.

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