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13-32

Land on which factory is located


Equipment
Inventory
Patent
Land held primarily for sale
Factory building

Sec 1231
yes
yes

Sec 1245

yes

yes

yes

Sec 1250

yes

yes

13-33
a. $54,000 ($40,000 + $14,000 )
b. $28,000 ($40,000 - $ 12,000)
c. $37,300 ($40,000 + $ 6,300 NLTCG - $9,000)
d. $30,000 ($40,000 - $ 3,000 LTCL - $7,000
13-34
a. $450 ($3,000 x 15%)
b. Decrease $2,610 ($5,610 - $3,000).
c. $600. The net Sec. 1231 gain of $3,000 is taxed at 20%, because her marginal tax
rate is 39.6%.
13-35
a. Sec. 1231 because does not apply to personal use assets
b. Sec. 1231 gain
c. Sec. 1231 loss
d. All of the $4,000 gain is Sec. 1245 ordinary income
13-36
a. $67,000 ($70,000 - $3,000)
b. $58,000 ($70,000 - $12,000
13-37
a. $80,000. .
b. 0 because the capital loss carry forward may be used only to offset capital gain
income.
13-39
2010 $2,000 NLTCG
2011 0 - $4,000 ordinary loss
2012 0 - $7,000 ordinary loss
2013 0 - The $5,000 net Sec. 1231 gain is ordinary income since there is $11,000 of
no recaptured.
2014 $5,800 NLTCG and $6,000 of ordinary income
2015 0 - $7,000 ordinary loss
13-40

$15,150 ($13,200 + $1,950). $40,000 of the gain from the sale is ordinary income due
to the five-year look back rule; thus $40,000 is taxed at 33%. The remaining gain of $13,000 is
taxed at 15%
13-41
Case
a
b
c

Gain/Loss
$107,000
452,000
(55,000)

Ordinary
$107,000
350,000

Sec 1231
102,000
(55,000)

13-42
a. $230,000. The maximum selling price that Elizabeth could sell the equipment for
without having to recognize Sec. 1245 ordinary income is $230,000, the adjusted basis.
b. $291,000. the selling price is $291,000
13-43
a. Depreciation of $403 ($4,200 x 0.1920 x 0.5) is allowed in 2015. The 50%
results from the half-year convention
b.
amount realized
less adjusted basis
realized gain

portion of truck
$2,100
(1613)
$ 487

personal use
$900
(1800)
($900)

13-44
a. Realized gain is $28,000 ($72,000 - $44,000).
b. Recognized gain is $28,000
c. $26,000 of the gain is Sec. 1245 ordinary income.
d. $2,000 of the gain is Sec. 1231.
e. Basis of the marketable securities is $30,000
f. Basis of equipment received is $42,000 ($44,000 - $30,000 + $28,000).

13-45
a. $6,000. ($40,000 - $34,000).
b. 0 because the exchange is a like-kind exchange.
c. $34,000.
d. $20,000. ($41,000 - $21,000)
e. The gain is $31,000. ($52,000 - $21,000). $29,000
13-46
a. $58,000 ($110,000 - $52,000)
b. $58,000 Sec. 1245 does not affect the amount of gain. and Sec. 1245 affects the
character of the gain.
c. $11,600 ($20,300 - $8,700) (.35% times the Sec. 1245 ordinary income of
$58,000) 15% times the LTCG)
13-47
a. $610,000 ($720,000 - $110,000)
b. $130,000 ($690,000 - $560,000)

13-49
a. $3,960 increase. $12,000 ($40,000 - $28,000)
b. $4,650 increase. $19,000 ($80,000 - $61,000)
c. $6,550 increase. $10,000 of the Sec. 1231 gain of $23,000 ($163,000 - $140,000)
d. $4,290 decrease ($13,000 x 33%) . Sec. 1231 loss of $13,000 ($127,000 $140,000).
13-50
a. $14,290 (14.29% x $100,000) of depreciation plus $250,000 expensed
b. $12,245 (24.49% x $100,000 x 1/2)
c. $76,535 Sec. 1245 ordinary income. ($150,000 - $73,465)
13-52
a.
amount realize
less adjusted basis
realized gain

building
$112,500
(0
)
$112,500

land
$12,500
(10,000)
$2,500

b. Jesse must recognize $90,000 of Sec. 1245 ordinary income and $22,500 of Sec. 1231
gain due to the sale of the building. The $2,500 gain on the sale of land is Sec. 1231 gain
13-53
a. $227,000. The maximum selling price that Rosemary could sell the building for
without having to recognize Sec. 1250 ordinary income is $227,000,.
b. $278,000. The first $73,000 of gain resulting from the sale of the building would be Sec. 1250
ordinary income.
13-56
a.building
original cost2,700,000
accum. depr
1,000,000

1,700,000
2,350,000

gain
b. land
sp
AB
gain

4,050,000

450000
300,000
150,000

c. $1,000,000. All of the gain to the extent of depreciation taken.


d. Reduce gain taxed at 25%, capital losses reduce gains at the highest tax rates first.