Purchase Solution

Gray Industries sale of 1231 assets: compute the gain

Not what you're looking for?

Ask Custom Question

Gray Industries (a sole proprietorship) sold three 1231 assets during 2008. Data on these property dispositions are as follows:

ASSET COST ACQUIRED DEPREC SOLD FOR SOLD ON
RACK 100,000 10-10-04 70,000 75,000 10-10-08
FORKLIFT 35,000 10-16-05 23,000 5,000 10-10-08
BIN 87,000 03-12-07 34,000 60,000 10-10-08

A) DETERMINE THE AMOUNT AND THE CHARACTER OF THE RECOGNIZED GAIN OR LOSS FROM THE DISPOSITION OF EACH ASSET.

B) ASSUMING GRAY HAS NO NONRECAPTURED NET 1231 LOSSES FROM PRIOR YEARS, HOW MUCH OF THE 2008 RECOGNIZED GAINS IS TREATED AS CAPITAL GAINS?

Purchase this Solution
Solution Summary

The solution provides a full explanation for each situation including calculations, the reporting treatment and the applicable tax law. Each response includes the tax form number and the lines where the amounts would be reported.

Solution Preview

Rack
Adjusted basis is 100,000 - 70,000 = 30,000
Sold for $75,000
Gain to be recognized is 75000 - 30000 = 45000
Asset held over 1 year, Sec 1245 asset
The gain is all ordinary because Gray will report the lesser of accumulated depreciation or gain for a Sec 1245 asset.
Gain will be reported on page 2 of Form 4797 which flows to ...

Purchase this Solution
Free BrainMass Quizzes
Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Operations Management

This quiz tests a student's knowledge about Operations Management

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Motivation

This tests some key elements of major motivation theories.

View More Free Quizzes
Related BrainMass Solutions

  • Identify White Corporation's assets ordinary, capital, 1231

    That is not to say they are direct costs of production, but the building is a depreciable asset and the depreciation is a fixed cost. When sold, the net book value (cost minus depreciation) will be used to compute any gain on sale.

  • Capital Gains and losses

    And Sec. 1231 gain or loss should be reported on Form 4797. 50) Davidson Industries, a sole proprietorship, sold the following assets in 2009 Asset Cost Acquired Depreciation Sales price Sale Date Warehouse $150,000 10/10/05 $28,000 $175,000 3

  • Tax Strategies 3-38, 3-58, I3-59, I8-40, I10-52, I13-65, I6-

    The sale of one asset will result in a $20,000 Sec. 1231 gain while the sale of the other asset will result in a $20,000 Sec. 1231 loss.

  • Section 1231 Assets

    Musical composition held by the composer IRC section 1231(a)(3)(A) states that "The term "section 1231 gain" means- (i) any recognized gain on the sale or exchange of property used in the trade or business, and (ii) any recognized gain from the compulsory

  • Taxation: Sec 1231 Netting Process and Accumulated Depreciation

    What is the amount and character of Winchester's gains and losses before the 1231 netting process? A. $1,000 ordinary gain, $4,000 Section 1231 loss B. $7,000 ordinary gain, $10,000 Section 1231 loss C.

  • Differences in an ordinary, capital, and Section 1231 asset

    The distinction between types of assets has to do with whether they can be depreciated, whether they are used in business, whether the gain on sale will be capital or ordinary.

  • Tax: passive losses, depreciation, Sec 1231, ordinary gain

    The equipment cost $270,000, and $60,000 of depreciation deductions was allowed. The results of the sale are a. ordinary income of $90,000. b. Sec. 1231 gain of $90,000. c. ordinary income of $60,000 and LTCG of $30,000.

  • What constitutes a sale, worthless security, 1244 stock

    How is it possible to have a casualty gain from the disposition of depreciable business property held more than a year? Is the gain initially a 1231 gain?

  • Compute casualty loss, employee business expenses, gain

    The amount and character of the gain is a. $50,000 Sec. 1250 ordinary income and $110,000 Sec. 1231 gain. b. $50,000 Sec. 1231 gain and $110,000 Sec. 1250 ordinary income. c. $160,000 Sec. 1231 gain.

View More Related Solutions