Ms. Drake sold a business that she had operated as a sole proprietorship for 18 years. On the date of sale, the business balance she showed the following assets: Accounts receivable Inventory Furniture and equipment: Cost Accumulated depreciation Leasehold improvements: Cost Accumulated amortization Tax Basis $ 44,000 185,600 Net cash flow 63,200 (50,560) 21,000 (4,200) Required: The purchaser paid a lump-sum price of $349,000 cash for the business. The sales contract stipulates that the FMV of the business inventory is $190,800, and the FMV of the remaining balance sheet assets equals adjusted tax basis. Assuming that Ms. Drake's marginal tax rate on ordinary income is 35 percent and her rate on capital gain is 15 percent, compute the net cash flow from the sale of her business.

Ms. Drake sold a business that she had operated as a sole proprietorship for 18 years. On the date of sale, the business balance she showed the following assets: Accounts receivable Inventory Furniture and equipment: Cost Accumulated depreciation Leasehold improvements: Cost Accumulated amortization Tax Basis $ 44,000 185,600 Net cash flow 63,200 (50,560) 21,000 (4,200) Required: The purchaser paid a lump-sum price of $349,000 cash for the business. The sales contract stipulates that the FMV of the business inventory is $190,800, and the FMV of the remaining balance sheet assets equals adjusted tax basis. Assuming that Ms. Drake's marginal tax rate on ordinary income is 35 percent and her rate on capital gain is 15 percent, compute the net cash flow from the sale of her business.

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter17: Property Transactions: § 1231 And Recapture Provisions

Section: Chapter Questions

Problem 37P

See similar textbooks

Similar questions

Ashton Company exchanged a nonmonetary asset with a cost of 30,000 and accumulated depreciation of 16,000 for another nonmonetary asset worth 12,000. Ashton also received 1,400 cash. In the entry to record this exchange, Ashton should record a: a. 2,000 gain b. 2,000 loss c. 600 gain d. 600 loss
Ms. Drake sold a business that she had operated as a sole proprietorship for 18 years. On the date of sale, the business balance sheet showed the following assets: Accounts receivable Inventory Furniture and equipment: Cost Accumulated depreciation Leasehold improvements: Cost Accumulated amortization Tax Basis $ 32,700 154,200 Net cash flow 53,000 (42,400) 26,500 (5,300) Required: The purchaser paid a lump-sum price of $322,000 cash for the business. The sales contract stipulates that the FMV of the business Inventory is $166,000, and the FMV of the remaining balance sheet assets equals adjusted tax basis. Assuming that Ms. Drake's marginal tax rate on ordinary income is 35 percent and her rate on capital gain is 15 percent, compute the net cash flow from the sale of her business.
Way Corporation disposed of the following tangible personal property assets in the current year. Date Original Acquired 5/12/17 Asset Date Sold Convention Basis Furniture (7-year) Machinery (7-year) Delivery truck* (5-year) Machinery (7-year) Computer (5-year) $ 82,500 99,500 42,000 298,600 102,000 7/15/21 HY 3/23/18 3/15/21 MQ 3/13/21 8/21/21 12/15/21 9/17/19 HY 10/11/20 MQ 10/11/21 HY *Used 100 percent for business. Assume that the delivery truck is not a luxury auto. Calculate Way Corporation's 2021 depreciation deduction (ignore §179 expense and bonus depreciation for this problem). (Use MACRS Table 1, Table 2, and Exhibit 10-6.) (Round your intermediate dollar calculations and final answer to the nearest whole dollar amount.) Depreciation deduction
Way Corporation disposed of the following tangible personal property assets in the current year. IITI Date Original Acquired 5/12/17 Asset Date Sold Convention Basis Furniture (7-year) Machinery (7-year) Delivery truck* (5-year) Machinery (7-year) Computer (5-year) $ 82,500 99,500 42,000 298,600 102,000 7/15/21 HY 3/23/18 3/15/21 MQ 9/17/19 3/13/21 HY 10/11/20 8/21/21 MQ 10/11/21 12/15/21 HY *Used 100 percent for business. Assume that the delivery truck is not a luxury auto. Calculate Way Corporation's 2021 depreciation deduction (ignore §179 expense and bonus depreciation for this problem). (Use MACRS Table 1, Table 2, and Exhibit 10-6.) (Round your intermediate dollar calculations and final answer to the nearest whole dollar amount.) Depreciation deduction
Ms. Drake sold a business that she had operated as a sole proprietorship for 18 years. On date of sale, the business balance sheet showed the following assets: Accounts receivable: 42,250 Inventory: 149,600 Furniture and Equipment: 63,750 Accumulated Depreciation: (51,000) Leashold Improvements: 23,000 Accumulated Amortization: (4,600) The purchaser paid a lump-sum price of $316,500 cash for the business. The sales contract stipulates that the FMV of the business inventory is $154,000, and the FMV of the remaining balance sheet assets equals adjusted tax basis. Assuming that Ms. Drake’s marginal tax rate on ordinary income is 35 percent and her rate on capital gain is 15 percent, compute the net cash flow from the sale of her business.
Way Corporation disposed of the following tangible personal property assets in the current year. Date Date Original Asset Acquired Sold Convention Basis Furniture (7-year) 5/12/16 7/15/20 HY $ 60,000 Machinery (7-year) 3/23/17 3/15/20 MQ 77,000 Delivery truck* (5-year) 9/17/18 3/13/20 HY 24,000 Machinery (7-year) 10/11/19 8/11/20 MQ 275,200 Computer (5-year) 10/11/20 12/15/20 HY 84,000 *Used 100 percent for business. Assume that the delivery truck is not a luxury auto. Calculate Way Corporation’s 2020 depreciation deduction (ignore §179 expense and bonus depreciation for this problem). (Use MACRS Table 1, Table 2, and Exhibit 10-6.) (Round your intermediate dollar calculations and final answer to the nearest whole dollar amount.) a. Depreciation Deduction?
This year, Sigma, Incorporated generated $637,500 income from its routine business operations. In addition, the corporation sold the following assets, all of which were held for more than 12 months: Initial Basis $ 165,200 110,800 Accumulated Depreciation $0 88,640 223,500 206,000 Marketable securities Production equipment Business realty: Land Building. "Through date of sale. Required: a. Compute Sigma's taxable income assuming that it used the straight-line method to calculate depreciation on the building and has no nonrecaptured Section 1231 losses. b. Recompute taxable income assuming that Sigma sold the securities for $169,400 rather than $73,750. Complete this question by entering your answers in the tabs below. Sale Price $ 73,750 38,000 0 61,800 236,750 231,000 Required A Required B Compute Sigma's taxable income assuming that it used the straight-line method to calculate depreciation on the building and has no nonrecaptured Section 1231 losses. Taxable income
Eleven years ago, Lynn, Incorporated purchased a warehouse for $315,000. This year,the corporation sold the warehouse to Firm D for $80,000 cash and D’s assumption ofa $225,000 mortgage. Through date of sale, Lynn deducted $92,300 straight-linedepreciation on the warehouse.Required:a. Compute Lynn’s gain recognized on the sale of the warehouse.
Way Corporation disposed of the following tangible personal property assets in the current year. Date Acquired 5/12/2018 3/23/2019 Original Basis $ 87,500 104,500 46,000 303,800 9/17/2020 10/11/2021 10/11/2022 106,000 Asset Furniture (7-year) Machinery (7-year) Delivery truck (5-year). Date Sold 7/15/2022 3/15/2022 3/13/2022 8/11/2022 12/15/2022 Depreciation deduction Convention HY MQ HY MQ Machinery (7-year); Computer (5-year) *Used 100 percent for business. Assume that the delivery truck is not a luxury auto. Calculate Way Corporation's 2022 depreciation deduction (ignore 5179 expense and bonus depreciation for this problem). (Use MACRS Table 1, Table 2. and Exhibit 10-6.) Note: Round your intermediate dollar calculations and final answer to the nearest whole dollar amount.
Way Corporation disposed of the following tangible personal property assets in the current year. Asset Date Acquired Date Sold Convention Original Basis Furniture (7-year) 5/12/2018 7/15/2022 HY $ 112,500 Machinery (7-year) 3/23/2019 3/15/2022 MQ 129,500 Delivery truck* (5-year) 9/17/2020 3/13/2022 HY 66,000 Machinery (7-year) 10/11/2021 8/11/2022 MQ 329,800 Computer (5-year) 10/11/2022 12/15/2022 HY 126,000 *Used 100 percent for business. Assume that the delivery truck is not a luxury auto. Calculate Way Corporation's 2022 depreciation deduction (ignore §179 expense and bonus depreciation for this problem).
This year, Sigma Incorporated generated $662,250 income from its routine business operations. In addition, the corporation sold the following assets, all of which were held for more than 12 months: Marketable securities Production equipment Business realty: Land Building Accumulated Initial Basis Depreciation* $ 149,600 103,600 Required A Required B 237,000 270,000 $0 82,880 Taxable income 81,000 *Through date of sale. Required: a. Compute Sigma's taxable income assuming that it used the straight-line method to calculate depreciation on the building and has no nonrecaptured Section 1231 losses. b. Recompute taxable income assuming that Sigma sold the securities for $159,200 rather than $75,000. Sale Price $ 75,000 41,750 Complete this question by entering your answers in the tabs below. 247,250 210,500 Compute Sigma's taxable income assuming that it used the straight-line method to calculate depreciation on the building and has no nonrecaptured Section 1231 losses.
Way Corporation disposed of the following tangible personal property assets in the current year. Date Acquired 5/12/19 Original Basis $ 55,000 72,000 20,000 270,000 3/23/20 9/17/21 10/11/22 10/11/23 80,000 Asset Furniture (7-year) Machinery (7-year) Delivery truck* (5-year) Machinery (7-year) Computer (5-year) *Used 100 percent for business. Date Sold 7/15/23 3/15/23 3/13/23 8/11/23 12/15/23 Depreciation deduction Convention HY MQ ELEGE HY MQ HY Assume that the delivery truck is not a luxury auto. Calculate Way Corporation's 2023 depreciation deduction (ignore §179 expense and bonus depreciation for this problem). (Use MACRS Table 1. Table 2, and Exhibit 10-6.) Note: Round your intermediate dollar calculations and final answer to the nearest whole dollar amount.