A business taxpayer sold all the depreciable assets of the business calculated

# A business taxpayer sold all the depreciable assets

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111. A business taxpayer sold all the depreciable assets of the business, calculated the gains and losses, and would like to know the final character of those gains and losses. The taxpayer had \$353,000 of adjusted gross income before considering the gains and losses from sale of the business assets. The taxpayer had unrecaptured § 1231 lookback loss of \$12,000. What is the treatment of the gains and losses summarized in the chart below after all possible netting and reclassification has been completed? What is the taxpayer’s adjusted gross income?(Ignore the self-employment tax deduction.)
The taxpayer has adjusted gross income of \$491,000 after including the effect of the property transactions. Machine #1’s \$66,000 gain is all ordinary income due to § 1245 depreciation recapture. Machine #3’s \$23,000 gain is all ordinary income due to § 1245 depreciation recapture. Machine #4 has \$28,000 of ordinary income due to § 1245 depreciation recapture (equals depreciation taken) and \$36,000 § 1231 gain (\$64,000 – \$28,000). Machine #2’s \$15,000 loss is a § 1231 loss. There is a \$21,000 net § 1231 gain (\$36,000 gain – \$15,000 loss) for the year. The \$12,000 § 1231 unrecaptured lookback loss converts \$12,000 of this gain to ordinary income, leaving \$9,000 of the net § 1231 gain to be treated as long-term capital gain. The net ordinary gain for the year is \$129,000 (\$66,000 + \$23,000 + \$28,000 + \$12,000). Adjusted gross income is \$491,000 (\$353,000 + \$129,000 + \$9,000). 112. A business machine purchased April 10, 2011, for \$98,000 was fully depreciated in 2011 using § 179 immediate expensing. On August 15, 2013, the machine was sold for \$67,000. What is the amount and nature of the gain or loss from disposition of the machine? The machine was a § 1231 asset because it was held for more than 12 months. However, all of the \$67,000 (\$67,000 sales price – \$0 adjusted basis) gain is ordinary gain due to § 1245 depreciation recapture. 113. An individual taxpayer has the gains and losses shown below. There are \$3,000 of § 1231 lookback losses. What is the net long-term capital gain? Holding Period/Property Charact er of Gain or Loss Amount 5 years/vacant land § 1231 gain \$7,000 2 years/business equipment § 1245 gain 3,200 3 years/publicly traded stock Long- term capital gain 890 8 months/publicly traded stock Short- term capital loss (1,870) The taxpayer has a net long-term capital gain of \$4,890 and a net short-term capital loss of \$1,870. The \$3,200 of § 1245 gain is ordinary income and does not affect the net long-term capital gain computation. Since there is \$3,000 of § 1231 lookback loss, \$3,000 of the \$7,000 § 1231 gain is treated as ordinary income and the remaining \$4,000 of § 1231 gain is treated as long-term capital gain. The \$1,870 of short-term capital loss offsets the \$4,890 of long-term capital gain, resulting is a net capital gain of \$3,020 (0%/15%/20% gain).
114. Vanna owned an office building that had been held more than one year when it was sold for \$567,000. The real estate had an adjusted basis of \$45,000 for the land and \$233,000 for the building. Straight-line depreciation of \$162,000 had been taken on the building. What is the amount and initial character of the gain or loss from disposition of the real estate? Is any of the gain unrecaptured § 1250 (25%) gain?