Tab: Chapter 2File: be3a89cf9873a088af414ab3fe9ad9c6684971d2.xlsPage 1 of 1NoAns5CapitalFactsgain or lossOrdinaryReturnBook income$120,000 $120,000 Loss on sale of building [S/L depreciation](8,000)Gain on sale of land used in business2,000 (This is ordinary loss and was deducted in book income)Loss on sale of stock (long-term)(1,000)(1,000)(This was deducted to get book income but is not deductible on tax return)Taxable Income6Charlotte CorporationTaxable Income & Income TaxDebitCreditsSales $700,000 Cost of sales $400,000 Municipal bond interest 2,000 Compensation 90,000 Meals and entertainment (Gross)20,000 Payroll taxes, & Misc. Expense 140,000 Subtotal 650,000 702,000 Net Income (GAAP) before taxes Add: one half of entertainmentDeduct: municipal bond interestTaxable incomeIncome Tax7FactsReturnSales$500,000 Cost of sales and normal operating expenses400,000Interest income on municipal bonds25,000Capital loss on sale of temporary stock investments held 2 months8,000Taxable income8Section 1231 LookbackYear 1Year 2Year 3Year 4Section 1231 gain (loss)$50,000 ($45,000)$20,000 $15,000 How will Barbara treat the $15,000 gain in year 4?
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Taxation in the United States, Generally Accepted Accounting Principles, Taxable income Income