4. Milt owns equipment used in his trade or business purchased four years ago for $225,000. Milt sells the equipment in the current year for $102,000 when its adjusted basis is $47,000. No other sales or exchanges are made this year or the preceding five years. His tax rate is 35% and 15% for ANCG for all years since the year of purchase.

( view the capital gains and dividends rates.)

Reference

Capital Gains and Dividends

Capital gains and losses are assigned to baskets. Five possible tax rates will apply to most capital gains and losses:

	Ordinary income tax rates (up to 37% in 2020) for gains on assets held one year or less
	28% rate on collectibles gains and includible Sec. 1202 gains
	Preferential tax rates for gains on assets held for more than one year and qualified dividends based on the taxpayer's taxable income and filing status as shown in the following table:

Preferencial Rate	Single	Filing Jointly*	Head of Household
0%	Up to $40,125	Up to $40,125	Up to $40,125
15%	> $40,125 but not over $40,125	> $40,125 but not over $40,125	> $40,125 but not over $40,125
20%	Over $40,125	Over $40,125	Over $40,125

* The corresponding amounts if married filing separately are half of the amounts for filing jointly. The preferential rate is zero for taxable income up to $40,125 if married filing

Requirements

a.	Determine the increase in Milt's AGI for the current year as a result of the sale if Sec. 1245 did not exist.
b.	Determine the increase in Milt's AGI for the current year as a result of the sale if Sec. 1245 does exist.
c.	Given that Sec. 1245 does exist, how much higher is his tax in (b) than in (a)?

(Assume that the current year tax is 2020.)

1 of 3 questions on bottom

Part 1

Requirement a. Determine the increase in Milt's AGI for the current year as a result of the sale if Sec. 1245 did not exist.

The increase in Milt's AGI as a result of the sale if Sec. 1245 did not exist would be

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