Heron Corporations recognized gain of 487492 is accounted for as follows

Heron corporations recognized gain of 487492 is

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Heron Corporation’s recognized gain of $487,492 is accounted for as follows: Ordinary income under § 1250 $ –0– Ordinary income under § 291 57,498 § 1231 gain 429,994 Total recognized gain $487,492 b. Heron Company, as a sole proprietorship, is not subject to § 291; instead, the normal depreciation recapture rules apply with respect to the gain recognized on the sale of the realty. The realty is § 1250 property and there is no recapture of depreciation under that provision when straight-line depreciation is used. As such, the entire gain of $487,492 is treated as § 1231 gain on the tax return of the proprietor of Heron. 47. a. A closely held C corporation that is a personal service corporation is subject to the passive activity loss rules and, as a result, Plum cannot deduct any of the $75,000 passive activity loss in the current year. Therefore, Plum’s taxable income is $430,000 ($410,000 net active income + $20,000 portfolio income – $0 passive activity loss). b. A closely held C corporation that is not a personal service corporation is subject to the passive loss rules, but it can deduct a passive activity loss against net active income (but not portfolio income). Thus, Plum’s taxable income is $355,000 [$410,000 (net active income) + $20,000 (portfolio income) – $75,000 (passive activity loss)]. 48. The total amount of Aquamarine’s charitable deduction for the year is $118,500. The painting is capital gain property, but it is tangible personal property which was not used for a purpose related to the qualified organization’s exempt function. Thus, the amount of the contribution is limited to the painting’s basis, or $15,000. The Apple stock is capital gain property and the amount of the contribution is the stock’s fair market value, or $90,000. The canned groceries are ordinary income property but the donation qualifies for the enhanced deduction for corporate contributions of inventory. As such, the amount of the contribution of the inventory is equal to the lesser of (1) the sum of the property’s basis plus 50% of the appreciation on the property, or (2) twice the property’s basis. Thus, the amount of the contribution of the canned groceries is $13,500 [$10,000 (basis) + 0.5($17,000 – $10,000)]. 49. Hoffman, Raabe, Maloney, Young, & Smith, CPAs 5191 Natorp Boulevard Mason, OH 45040 December 10, 2014 Mr. Joseph Thompson Jay Corporation 1442 Main Street Freeport, ME 04032
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Dear Mr. Thompson: I have evaluated the proposed alternatives for your 2014 year-end contribution to the University of Maine. I recommend that you sell the Brown Corporation stock and donate the proceeds to the University. The four alternatives are discussed below. Donation of cash, the unimproved land, or the Brown Corporation stock each will result in a $200,000 charitable contribution deduction. Donation of the Maize Corporation stock will result in only a $140,000 charitable contribution deduction. Contribution of the stock will result in a less desirable outcome from a tax perspective. However, you will benefit in two ways if you sell the stock and give the $200,000 in proceeds to the University. Donation of the proceeds will result in a $200,000 charitable contribution deduction.
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