property_transactions_examples

property_transactions_examples - Topic Cost recovery...

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Topic: Cost recovery & property transactions Part 1: Cost recovery . The Knight Corporation purchases machinery (five-year property class) on February 17, 2009 at a cost of $600,000. Required : Compute Knight’s cost recovery for 2009-2014 assuming that it is “new” machinery & Knight wants to minimize their taxable income in 2009. Part 2: Disposal of Sec. 1231 property and Sec. 1245 recapture . The Patriot Company (a sole proprietorship) sold four assets in 2010. The gains and losses are summarized in the table below. Asset Purchased on Sold on Depreciation Gain (Loss) Machine #1 10/10/08 11/11/10 $323,000 $56,000 Machine #2 10/02/07 11/11/10 65,000 (15,000) Machine #3 09/23/06 11/11/10 183,000 23,000 Machine #4 09/23/06 11/11/10 28,000 64,000 Required : What is the amount and character of Patriot’s gain/loss? Part 3: Sec 1245 recapture . A business machine purchased April 10, 2007 for $86,000 was fully depreciated in 2007 using the Sec. 179 expensing election. On August 15, 2010, the machine was sold for $57,000. Required : What is the amount & character of the gain or loss? Part 4: Disposal of Sec. 1231 property and recapture – Noncorporate taxpayer. The table below summarizes the
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