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AC553_W7_Solution12_46

AC553_W7_Solution12_46 - (\$ 250 What are the net tax...

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1 Problem 12-46 Solution Section 1231 Assets: Nettings Barbara Bliss had the following recognized gains and losses during 2007: Casualty items: Business casualty gain (property held 5 months) ........................... \$ 100 Business casualty loss (property held 19 months) ......................... (\$ 200) Business casualty gain (property held 21 months) .......................... \$ 500 Section 1231 gain ............................................................................ \$ 750 1231 loss ........................................................................................ (\$ 600) LTCL ............................................................................................. (\$4,000) STCL ...............................................................................................
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Unformatted text preview: (\$ 250) What are the net tax consequences of these gains and losses for Barbara? Solution: Barbaras adjusted gross income is \$30,000 without considering the above items Section 1231 Assets: Nettings (12,645) The business casualty gain on the property held five months is ordinary income. The other two casualty items are netted in the first netting to yield a \$300 gain (\$500 1 \$200) which is carried to the second netting. There is a net gain of \$450 on the second netting (\$300 + \$750 1 \$600) which is long-term capital gain. This results in a net LTCL of \$3,550 and a net STCL of \$250. The deduction for Barbara is \$3,000 with a LTCL carryover of \$800. Her adjusted gross income is \$27,100 (\$30,000 1 \$3,000 + \$100)....
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