Fareed sells a piece of equipment used in a business for $31,500 during 2021. The equipment was purchased on July 1, 2019, at a cost of $22,000. Fareed has taken $6,600 of depreciation on the equipment. What are the amount and classification of the gain on the sale by Fareed? Group of answer choices $9,500 Section 1231 gain. $16,100 ordinary income under Section 1245. $16,100 Section 1231 gain. $6,600 ordinary

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Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.