Chapter_11_Homework_Assignment_Solutions

Chapter_11_Homework_Assignment_Solutions - Chapter 11...

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Chapter 11 Homework Assignments 58. In 2008, Sondra Corporation recognizes $18,000 in Section 1231 gains and $10,000 in Section 1231 losses. In 2003, Sondra reported $12,000 in Section 1231 losses and no Section 1231 gains. No other Section 1231 gains or losses were recognized by Sondra during the 2003-2007 period. What is the tax treatment of Sondra's 2008 Section 1231 gains and losses? The Section 1231 netting results in 2008 ordinary income of $8,000 due to the $12,000 of nonrecaptured net Section 1231 losses from 2003. Step 1 Netting: No casualty gains or losses. Go to Step 2. Step 2 Netting: Section 1231 gains $ 18,000 Section 1231 losses (10,000 ) Net Section 1231 gain $ 8,000 Step 3 Netting: The net Section 1231 gain from 2008 is recaptured as ordinary income due to the 2003 net Section 1231 loss of $12,000. The remaining 2003 Section 1231 loss of $4,000 ($12,000 - $8,000) will never be recaptured because 2003 is not part of the preceding 5-year period for the tax year 2009. 60. Rhinelander Corporation has the following net Section 1231 gains and losses for 2003 through 2007: 2003 $ 8,000 2004 (6,000) 2005 (13,000) 2006 11,000 2007 15,000 a. What is the proper characterization of the net Section 1231 gains and losses for 2003 - 2007 for Rhinelander Corporation? The Section 1231 gain in 2003 is a long-term capital gain (there are no prior year losses to apply the lookback rule). The losses in 2004 and 2005 are deducted in those years as ordinary losses. In 2006, the $11,000 Section 1231 gain is ordinary income under
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This homework help was uploaded on 02/20/2009 for the course H ADM 422 taught by Professor Lhensley during the Fall '08 term at Cornell University (Engineering School).

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Chapter_11_Homework_Assignment_Solutions - Chapter 11...

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