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Taxable Income and Tax Liability - Shimmer Inc.

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Shimmer Inc is at calendar year end. This year its sells the following long term assets:

Assets Sales Price Cost Acc. Depr
Building $230,000 $200,000 $52,000
Equipment $ 80,000 $148,000 $23,000

Shimmer does not sell any other assets during the year, and its taxable income before these transactions is $800,000. What are Shimmer's taxable income and tax liability for the year?

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Basis in the building=Cost-Acc. Dpr=200,000-52,000=148,000
Realized Gain=sales price-basis=230,000-148,000=82,000
Basis in the equipment=Cost-Acc. Dpr=148,000-23,000=125,000
Realized Loss=sales price-basis=80,000-125,000=-45,000

Taxable ...

Solution Summary

This solution addresses the Section 1250 real property depreciation recapture rule.