Capital Gains and losses
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46) Jake purchased a $200,000 crane for his construction business. He sold the crane for $145,000 after taking $110,000 of depreciation. What are the nature and the amount of gain or loss on the sale? On what tax form would the gain or loss be reported?
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 3/15/09
Truck 18,000 01/15/08 4,500 16,000 1/15/09
Computer 25,000 07/31/08 3,000 21,000 8/31/09
Determine the amount and the character of the realized and recognized gain or loss from the sale of each asset.
How would your answer change if the computer were a personal computer used at home?
56) Ramon received a gift of stock from his uncle. The basis of the stock to his uncle was $20,000, and it had an FMV at the date of the gift of $13,000. The donor held the property for more than one year. Complete the following chart under the independent situations shown:
Situation 1 Situation 2 Situation 3
Donor's basis $20,000 $20,000 $20,000
FMV at gift date 13,000 13,000 13,000
Ramon's selling price 25,000 10,000 15,000
Basis to Ramon ---- -- ---
Taxable gain if any --- ---- ---
Deductible loss if any ---- ----- -----
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Capital gains and losses are examined.
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46) Jake purchased a $200,000 crane for his construction business. He sold the crane for $145,000 after taking $110,000 of depreciation. What are the nature and the amount of gain or loss on the sale? On what tax form would the gain or loss be reported?
The crane purchased by Jake is a Sec. 1231 property, which is depreciable property used in trade or business that are held for more than one year. (Assume Jake purchased the crane more than a year ago. If not, the crane is ordinary income asset and all the gain are treated as ordinary income)
Adjusted basis=200,000-110,000=90,000
Recognized gain=145,000-90,000=55,000
Therefore, the recognized gain of 55,000 is a Sec. 1231 gain, but due to the Sec. 1245 depreciation recapture rule, the $55,000 is still taxed as ordinary income. And Sec. 1231 gain ...
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