11 Part 2 of 3 5 points Required information [The following information applies to the questions displayed below.] WAR (We Are Rich) has been in business since 1989. WAR is an accrual-method sole proprietorship that deals in the manufacturing and wholesaling of various types of golf equipment. Hack & Hack CPAs has filed accurate tax returns for WAR's owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with the owner of WAR-Mr. Someday Woods (single). However, in early 2022, Jack Hack and Someday Woods played a round of golf, and Jack, for the first time ever, beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired you to compute his 2022 taxable income. Mr. Woods was able to provide you with the following information from prior tax returns. The taxable income numbers reflect the results from all of Mr. Woods's activities except for the items separately stated. You will need to consider how to handle the separately stated items for tax purposes. Also, note that the 2017- 2021 numbers do not reflect capital loss carryovers. eBook Print Ordinary taxable income Other items not included in ordinary taxable income: Net gain (loss) on disposition of §1231 assets Net long-term capital gain References (loss) on disposition of capital assets 2017 2018 2019 2020 2021 $ 4,420 $ 2,210 $ 98,935 $ 178,925 $ 263,125 11,050 $ 3,630 $ (16,575) $ 1,210 (21,200) $ (7,260) $ (9,100) In 2022, Mr. Woods had taxable income in the amount of $522,000 before considering the following events and transactions that transpired in 2022: a. On January 1, 2022, WAR purchased a plot of land for $110,500 with the intention of creating a driving range where patrons could test their new golf equipment. WAR never got around to building the driving range; instead, WAR sold the land on October 1, 2022, for $44,200. b. On August 17, 2022, WAR sold its golf testing machine, "Iron Byron," and replaced it with a new machine, "Iron Tiger." "Iron Byron" was purchased and installed for a total cost of $26,200 on February 5, 2018. At the time of sale, "Iron Byron" had an adjusted tax basis of $8,200. WAR sold "Iron Byron" for $35,500. c. In the months October through December 2022, WAR sold various assets to come up with the funds necessary to invest in WAR's latest and greatest invention—the three-dimple golf ball. Data on these assets are provided below: Placed in Service (or Asset Someday's black purchased) Sold Initial Basis Accumulated Selling Depreciation Price leather sofa (used in office) 4/4/21 Someday's office 3/1/20 chair Marketable securities 2/1/19 11/8/22 12/1/22 10/16/22 $ 3,840 9,680 $ 750 $ 3,530 3,420 5,050 14,520 0 22,100 Land held for 7/1/21 11/29/22 55,500 0 57,450 investment Other investment property 11/30/20 10/15/22 20,500 0 16,400 d. Finally, on May 7, 2022, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR purchased the building on January 5, 2010, for $242,500 ($212,000 for the building, $30,500 for the land). At the time of the sale, the accumulated depreciation on the building was $60,500. WAR sold the building (with the land) for $363,000. The fair market value of the land at the time of sale was $55,500. Note: Do not round intermediate computations. Round your final answers to the nearest whole dollar amount. Loss amounts should be indicated by a minus sign. Compute Mr. Woods's tax liability for the year. (Ignore any net investment income tax for the year and assume the 20 percent qualified business income deduction is included in taxable income before these transactions.) Use Tax rate schedules, dividends and capital gains tax rates for reference. Tax Liability: Tax on ordinary income Tax on 25% Gain Tax on 0/15/20% Gain (taxed at 20%) Total tax liability $ 0
11 Part 2 of 3 5 points Required information [The following information applies to the questions displayed below.] WAR (We Are Rich) has been in business since 1989. WAR is an accrual-method sole proprietorship that deals in the manufacturing and wholesaling of various types of golf equipment. Hack & Hack CPAs has filed accurate tax returns for WAR's owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with the owner of WAR-Mr. Someday Woods (single). However, in early 2022, Jack Hack and Someday Woods played a round of golf, and Jack, for the first time ever, beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired you to compute his 2022 taxable income. Mr. Woods was able to provide you with the following information from prior tax returns. The taxable income numbers reflect the results from all of Mr. Woods's activities except for the items separately stated. You will need to consider how to handle the separately stated items for tax purposes. Also, note that the 2017- 2021 numbers do not reflect capital loss carryovers. eBook Print Ordinary taxable income Other items not included in ordinary taxable income: Net gain (loss) on disposition of §1231 assets Net long-term capital gain References (loss) on disposition of capital assets 2017 2018 2019 2020 2021 $ 4,420 $ 2,210 $ 98,935 $ 178,925 $ 263,125 11,050 $ 3,630 $ (16,575) $ 1,210 (21,200) $ (7,260) $ (9,100) In 2022, Mr. Woods had taxable income in the amount of $522,000 before considering the following events and transactions that transpired in 2022: a. On January 1, 2022, WAR purchased a plot of land for $110,500 with the intention of creating a driving range where patrons could test their new golf equipment. WAR never got around to building the driving range; instead, WAR sold the land on October 1, 2022, for $44,200. b. On August 17, 2022, WAR sold its golf testing machine, "Iron Byron," and replaced it with a new machine, "Iron Tiger." "Iron Byron" was purchased and installed for a total cost of $26,200 on February 5, 2018. At the time of sale, "Iron Byron" had an adjusted tax basis of $8,200. WAR sold "Iron Byron" for $35,500. c. In the months October through December 2022, WAR sold various assets to come up with the funds necessary to invest in WAR's latest and greatest invention—the three-dimple golf ball. Data on these assets are provided below: Placed in Service (or Asset Someday's black purchased) Sold Initial Basis Accumulated Selling Depreciation Price leather sofa (used in office) 4/4/21 Someday's office 3/1/20 chair Marketable securities 2/1/19 11/8/22 12/1/22 10/16/22 $ 3,840 9,680 $ 750 $ 3,530 3,420 5,050 14,520 0 22,100 Land held for 7/1/21 11/29/22 55,500 0 57,450 investment Other investment property 11/30/20 10/15/22 20,500 0 16,400 d. Finally, on May 7, 2022, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR purchased the building on January 5, 2010, for $242,500 ($212,000 for the building, $30,500 for the land). At the time of the sale, the accumulated depreciation on the building was $60,500. WAR sold the building (with the land) for $363,000. The fair market value of the land at the time of sale was $55,500. Note: Do not round intermediate computations. Round your final answers to the nearest whole dollar amount. Loss amounts should be indicated by a minus sign. Compute Mr. Woods's tax liability for the year. (Ignore any net investment income tax for the year and assume the 20 percent qualified business income deduction is included in taxable income before these transactions.) Use Tax rate schedules, dividends and capital gains tax rates for reference. Tax Liability: Tax on ordinary income Tax on 25% Gain Tax on 0/15/20% Gain (taxed at 20%) Total tax liability $ 0
Chapter28: Income Taxati On Of Trusts And Estates
Section: Chapter Questions
Problem 8DQ
Related questions
Question
WAR (We Are Rich) has been in business since 1989. WAR is an accrual-method sole proprietorship that deals in the manufacturing and wholesaling of various types of golf equipment. Hack & Hack CPAs has filed accurate tax returns for WAR's owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with the owner of WAR—Mr. Someday Woods (single). However, in early 2022, Jack Hack and Someday Woods played a round of golf, and Jack, for the first time ever, beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired you to compute his 2022 taxable income. Mr. Woods was able to provide you with the following information from prior tax returns. The taxable income numbers reflect the results from all of Mr. Woods's activities except for the items separately stated. You will need to consider how to handle the separately stated items for tax purposes. Also, note that the 2017–2021 numbers do not reflect capital loss carryovers.
| 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|
| Ordinary taxable income | $ 4,420 | $ 2,210 | $ 98,935 | $ 178,925 | $ 263,125 |
| Other items not included in ordinary taxable income: | |||||
| Net gain (loss) on disposition of §1231 assets | $ 3,630 | 11,050 | $ (7,260) | ||
| Net long-term |
$ (16,575) | $ 1,210 | $ (21,200) | $ (9,100) |
In 2022, Mr. Woods had taxable income in the amount of $522,000 before considering the following events and transactions that transpired in 2022:
- On January 1, 2022, WAR purchased a plot of land for $110,500 with the intention of creating a driving range where patrons could test their new golf equipment. WAR never got around to building the driving range; instead, WAR sold the land on October 1, 2022, for $44,200.
- On August 17, 2022, WAR sold its golf testing machine, "Iron Byron," and replaced it with a new machine, "Iron Tiger." "Iron Byron" was purchased and installed for a total cost of $26,200 on February 5, 2018. At the time of sale, "Iron Byron" had an adjusted tax basis of $8,200. WAR sold "Iron Byron" for $35,500.
- In the months October through December 2022, WAR sold various assets to come up with the funds necessary to invest in WAR's latest and greatest invention—the three-dimple golf ball. Data on these assets are provided below:
Asset Placed in Service (or purchased) Sold Initial Basis Accumulated Depreciation Selling Price Someday's black leather sofa (used in office) 4/4/21 10/16/22 $ 3,840 $ 750 $ 3,530 Someday's office chair 3/1/20 11/8/22 9,680 3,420 5,050 Marketable securities 2/1/19 12/1/22 14,520 0 22,100 Land held for investment 7/1/21 11/29/22 55,500 0 57,450 Other investment property 11/30/20 10/15/22 20,500 0 16,400 - Finally, on May 7, 2022, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR purchased the building on January 5, 2010, for $242,500 ($212,000 for the building, $30,500 for the land). At the time of the sale, the accumulated depreciation on the building was $60,500. WAR sold the building (with the land) for $363,000. The fair market value of the land at the time of sale was $55,500.
Note: Do not round intermediate computations. Round your final answers to the nearest whole dollar amount. Loss amounts should be indicated by a minus sign.
Compute Mr. Woods's tax liability for the year. (Ignore any net investment income tax for the year and assume the 20 percent qualified business income deduction is included in taxable income before these transactions.) Use Tax rate schedules, dividends and
![11
Part 2 of 3
5
points
Required information
[The following information applies to the questions displayed below.]
WAR (We Are Rich) has been in business since 1989. WAR is an accrual-method sole proprietorship that deals in the
manufacturing and wholesaling of various types of golf equipment. Hack & Hack CPAs has filed accurate tax returns for
WAR's owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with
the owner of WAR-Mr. Someday Woods (single). However, in early 2022, Jack Hack and Someday Woods played a round
of golf, and Jack, for the first time ever, beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired
you to compute his 2022 taxable income. Mr. Woods was able to provide you with the following information from prior tax
returns. The taxable income numbers reflect the results from all of Mr. Woods's activities except for the items separately
stated. You will need to consider how to handle the separately stated items for tax purposes. Also, note that the 2017-
2021 numbers do not reflect capital loss carryovers.
eBook
Print
Ordinary taxable income
Other items not included in
ordinary taxable income:
Net gain (loss) on disposition
of §1231 assets
Net long-term capital gain
References
(loss) on disposition of
capital assets
2017
2018
2019
2020
2021
$ 4,420
$ 2,210
$ 98,935 $ 178,925
$ 263,125
11,050
$ 3,630
$
(16,575)
$ 1,210
(21,200)
$ (7,260)
$ (9,100)
In 2022, Mr. Woods had taxable income in the amount of $522,000 before considering the following events and
transactions that transpired in 2022:
a. On January 1, 2022, WAR purchased a plot of land for $110,500 with the intention of creating a driving range where
patrons could test their new golf equipment. WAR never got around to building the driving range; instead, WAR sold the
land on October 1, 2022, for $44,200.
b. On August 17, 2022, WAR sold its golf testing machine, "Iron Byron," and replaced it with a new machine, "Iron Tiger."
"Iron Byron" was purchased and installed for a total cost of $26,200 on February 5, 2018. At the time of sale, "Iron
Byron" had an adjusted tax basis of $8,200. WAR sold "Iron Byron" for $35,500.
c. In the months October through December 2022, WAR sold various assets to come up with the funds necessary to
invest in WAR's latest and greatest invention—the three-dimple golf ball. Data on these assets are provided below:
Placed in
Service (or
Asset
Someday's black
purchased)
Sold
Initial
Basis
Accumulated Selling
Depreciation Price
leather sofa (used
in office)
4/4/21
Someday's office
3/1/20
chair
Marketable securities
2/1/19
11/8/22
12/1/22
10/16/22 $ 3,840
9,680
$ 750
$ 3,530
3,420
5,050
14,520
0
22,100
Land held for
7/1/21
11/29/22
55,500
0
57,450
investment
Other investment
property
11/30/20
10/15/22
20,500
0
16,400
d. Finally, on May 7, 2022, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR
purchased the building on January 5, 2010, for $242,500 ($212,000 for the building, $30,500 for the land). At the time
of the sale, the accumulated depreciation on the building was $60,500. WAR sold the building (with the land) for
$363,000. The fair market value of the land at the time of sale was $55,500.
Note: Do not round intermediate computations. Round your final answers to the nearest whole dollar amount. Loss
amounts should be indicated by a minus sign.
Compute Mr. Woods's tax liability for the year. (Ignore any net investment income tax for the year and assume the 20 percent qualified
business income deduction is included in taxable income before these transactions.) Use Tax rate schedules, dividends and capital
gains tax rates for reference.
Tax Liability:
Tax on ordinary income
Tax on 25% Gain
Tax on 0/15/20% Gain (taxed at 20%)
Total tax liability
$
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F65bf4f5d-614d-4b8c-996a-1fde4d80ef3e%2F7b82523e-a6fc-468a-97ba-54054f209b2d%2F4ja3k99_processed.png&w=3840&q=75)
Transcribed Image Text:11
Part 2 of 3
5
points
Required information
[The following information applies to the questions displayed below.]
WAR (We Are Rich) has been in business since 1989. WAR is an accrual-method sole proprietorship that deals in the
manufacturing and wholesaling of various types of golf equipment. Hack & Hack CPAs has filed accurate tax returns for
WAR's owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with
the owner of WAR-Mr. Someday Woods (single). However, in early 2022, Jack Hack and Someday Woods played a round
of golf, and Jack, for the first time ever, beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired
you to compute his 2022 taxable income. Mr. Woods was able to provide you with the following information from prior tax
returns. The taxable income numbers reflect the results from all of Mr. Woods's activities except for the items separately
stated. You will need to consider how to handle the separately stated items for tax purposes. Also, note that the 2017-
2021 numbers do not reflect capital loss carryovers.
eBook
Print
Ordinary taxable income
Other items not included in
ordinary taxable income:
Net gain (loss) on disposition
of §1231 assets
Net long-term capital gain
References
(loss) on disposition of
capital assets
2017
2018
2019
2020
2021
$ 4,420
$ 2,210
$ 98,935 $ 178,925
$ 263,125
11,050
$ 3,630
$
(16,575)
$ 1,210
(21,200)
$ (7,260)
$ (9,100)
In 2022, Mr. Woods had taxable income in the amount of $522,000 before considering the following events and
transactions that transpired in 2022:
a. On January 1, 2022, WAR purchased a plot of land for $110,500 with the intention of creating a driving range where
patrons could test their new golf equipment. WAR never got around to building the driving range; instead, WAR sold the
land on October 1, 2022, for $44,200.
b. On August 17, 2022, WAR sold its golf testing machine, "Iron Byron," and replaced it with a new machine, "Iron Tiger."
"Iron Byron" was purchased and installed for a total cost of $26,200 on February 5, 2018. At the time of sale, "Iron
Byron" had an adjusted tax basis of $8,200. WAR sold "Iron Byron" for $35,500.
c. In the months October through December 2022, WAR sold various assets to come up with the funds necessary to
invest in WAR's latest and greatest invention—the three-dimple golf ball. Data on these assets are provided below:
Placed in
Service (or
Asset
Someday's black
purchased)
Sold
Initial
Basis
Accumulated Selling
Depreciation Price
leather sofa (used
in office)
4/4/21
Someday's office
3/1/20
chair
Marketable securities
2/1/19
11/8/22
12/1/22
10/16/22 $ 3,840
9,680
$ 750
$ 3,530
3,420
5,050
14,520
0
22,100
Land held for
7/1/21
11/29/22
55,500
0
57,450
investment
Other investment
property
11/30/20
10/15/22
20,500
0
16,400
d. Finally, on May 7, 2022, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR
purchased the building on January 5, 2010, for $242,500 ($212,000 for the building, $30,500 for the land). At the time
of the sale, the accumulated depreciation on the building was $60,500. WAR sold the building (with the land) for
$363,000. The fair market value of the land at the time of sale was $55,500.
Note: Do not round intermediate computations. Round your final answers to the nearest whole dollar amount. Loss
amounts should be indicated by a minus sign.
Compute Mr. Woods's tax liability for the year. (Ignore any net investment income tax for the year and assume the 20 percent qualified
business income deduction is included in taxable income before these transactions.) Use Tax rate schedules, dividends and capital
gains tax rates for reference.
Tax Liability:
Tax on ordinary income
Tax on 25% Gain
Tax on 0/15/20% Gain (taxed at 20%)
Total tax liability
$
0
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