Katy had the following sales on December 31, 2021:

1. sale of a machine used in business for 10,000. The original cost was 2,000 and there was 500 of accumulated depreciation. It had been bought 4 years ago. The tax impact of this transaction is:_________________________

2. sale of another machine used in business for 5,000. It had been bought earlier in the year for 7000 and had no accumulated depreciation. The tax impact of this transaction is:_________________________

3. sale of raw land held for investment for 30,000. it was purchased earlier this year for 20,000. The tax impact of this transaction is:_________________________

4. Sale of a warehouse for 200,000.it was purchased 2 years ago for 100,000 and had 10,000 of accumulated depreciation. Katy allocated half of both the original purchase price, and the sales price, to the land, and half to the building. The tax impact of this transaction is:_________________________

5. She exchanged Apple Company stock (her basis was $5000) for Cisco Company stock which was worth $7,000. She had owned the Apple stock for 6 months. The tax impact of this transaction is:_________________________

6. She also owned a factory, used in business, condemned by the government. She had originally purchased it for $800,000 and it had $550,000 of accumulated depreciation at the time of the condemnation. The government gave her $400,000 as a condemnation award. She used $390,000 of the proceeds to buy a new factory. The tax impact of this transaction is:_________________________

7. Independent of the above, she had a net long term capital gain of $20,000 and a net short term capital loss of $10,000 for the year. Compute the overall tax consequences for her for 2021. Be sure to make columns for Sec 1231, 25% real estate, capital gains/losses, and ordinary gains/losses________________

8. Briefly, how might your answer be different if she had some unrecaptured Sec. 1231 loss from prior years? ___________________________________

1. How would your answer differ if she did not reinvest any of the condemnation proceeds in a new factory?_________________________________

Answer rating: 100% (QA)

ANSWERS The tax impact of the machine sale is 1000 The tax impact of the second machine sale is 500 ... View the full answer