Tally Corporation sold machinery that had been used in its
business for a loss of $22,000 during 2013. The machinery had
been purchased and placed in service sixteen months earlier. For
2013, the $22,000 loss will be treated as a

(c) The requirement is to determine the nature of a loss
resulting from the sale of business machinery that had been held
sixteen months. Property held for use in a trade or business is
specifically excluded from the definition of capital assets, and if
held for more than one year is considered Sec. 1231 property.
Answer (b) is incorrect because Sec. 1245 only applies to gains.