Problem Set 4 Key - AAE 320 Problem Set#4 Answer...

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AAE 320 Problem Set #4 Answer Key (Prepared by Phil Harris) Question 1 Sale Price Depreciation Basis Gain (from facts) (from facts) (from facts) Feed 90,000 raised NA 0 90,000 Feeder calves 25,000 raised NA 0 25,000 Beef heifers 12,000 raised NA 0 12,000 Beef cows 40,000 raised NA 0 40,000 Machinery 155,000 220,000 100,000 120,000 35,000 Buildings 20,000 60,000 60,000 0 20,000 Land 500,000 175,000 0 175,000 325,000 Total 842,000 455,000 160,000 295,000 547,000 Question 2 Capital gains Feed 90,000 90,000 Feeder calves 25,000 25,000 Beef heifers 12,000 Beef cows 40,000 Machinery 35,000 Buildings 20,000 Land 325,000 Total 162,000 115,000 385,000 Question 3 Tax on all ordinary income 1 Total ordinary income from asset sales 162,000 2 Other ordinary income 20,000 3 Total ordinary taxable income 182,000 4 Bottom of 28% bracket (from tax table) 131,450 5 Excess over bottom of 28% bracket (line 3 minus line 4) 50,550 6 28% tax rate 0.28 7 Tax on excess over bottom of 28% bracket (line 5 x 28%) 14,154 8 Tax on income in lower brackets (from tax table) 25,550 9 Total tax on ordinay income (line 7 plus line 8) 39,704 Minus tax on $20,000 of other income 10 Other ordinary income 20,000 11 Bottom of 15% bracket (from tax table) 16,050 12 Excess over bottom of 15% bracket (line 10 minus line 11) 3,950 13 15% tax rate 0.15
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