Andrea owns a small company that produces facial masks. Thanks to COVID-19, her business was booming...

 

  

Transcribed Image Text:

Andrea owns a small company that produces facial masks. Thanks to COVID-19, her business was booming at the beginning of 2020. But by the end of 2022, since the need for facial masks is no longer there, Andrea decided to close her business. The first step to close her business involves selling off business assets. Below are her assets transaction info Assets Sold date Sold price Purchased Date Land Furniture Equipment 2/1/21 Warehouse 1/1/21 1/1/21 2/14/21 Cost 20k 100k 50K 150k 12/31/22 12/31/22 12/31/22 12/31/22 10k 20k 55k 200k NOTE: Assume there is no $179 and Bonus depreciation. Use MACRS only for depreciation a) Calculate total accumulated depreciation of each asset until the sold date (12/31/22) Hint: Review Class 15 material b) Calculate the Adjusted basis for each asset c) Calculate the Gain/Loss Recognized for each asset. d) Point out the exact character of gain/loss for each asset gain/loss (ex Ordinary, pure 1231, 1245, 1250, etc.) e) Calculate the Net 1231 Gain/Loss Hint: Be aware of 1245 Depreciation recapture and 1231 lookback rules 1) Characterize the gain from the whole 4 transactions into 2 categories: Total Ordinary Gain & Total LTCG Your answer: Question 1 For a) and b), fill out this table Assets Furniture 2/14/21 Equipment 2/1/21 Warehouse 1/1/21 1/1/21 Land Purchased Date Land Cost 12/31/20 For c) and d), fill out the table below Assets Sold date: Furniture Equipment 12/31/20 Warehouse 12/31/20 12/31/20 20k 100k 50k 150k Convention (half Asset life (years) year or mid-month) half-year half-year half-year half-year Sold price 10k 20K 55k 200K 14629 61600 1.88 40000 150000 1.92 2 Gain/Loss Adjusted basis (from recognized table above) 2 -7500 -4629 -41600 15000 Depreciation Depreciation year 1 (2021) year 2 (2022) 2514 18400 5000 Characters ordinary ordinary 1231, 1245 1231 2857 20000 5000 Acc. Total Depreciation 5371 38400 10000 Explanation for characters Adjusted Basis 14629 61600 40000 150k For e), fill out this table Assets Sold price Furniture Equipment 20k Warehouse 55k Land 10k 200k For f) fill out this table Total ordinary gain/loss Total LTCG Total accumulated depreciation (from above) 5371 38400 10000 0 Amount Adjusted basis (from above) 14629 61600 40000 150000 Explanation Gain/Loss recognized (from above) -7500 -4629 -41600 15000 Characters Depreciation recapture (from) above) ordinary ordinary 1231,1245 1231 Net $1231 (sum of the "Enter $1231 netting" column) Enter $1231) netting Andrea owns a small company that produces facial masks. Thanks to COVID-19, her business was booming at the beginning of 2020. But by the end of 2022, since the need for facial masks is no longer there, Andrea decided to close her business. The first step to close her business involves selling off business assets. Below are her assets transaction info Assets Sold date Sold price Purchased Date Land Furniture Equipment 2/1/21 Warehouse 1/1/21 1/1/21 2/14/21 Cost 20k 100k 50K 150k 12/31/22 12/31/22 12/31/22 12/31/22 10k 20k 55k 200k NOTE: Assume there is no $179 and Bonus depreciation. Use MACRS only for depreciation a) Calculate total accumulated depreciation of each asset until the sold date (12/31/22) Hint: Review Class 15 material b) Calculate the Adjusted basis for each asset c) Calculate the Gain/Loss Recognized for each asset. d) Point out the exact character of gain/loss for each asset gain/loss (ex Ordinary, pure 1231, 1245, 1250, etc.) e) Calculate the Net 1231 Gain/Loss Hint: Be aware of 1245 Depreciation recapture and 1231 lookback rules 1) Characterize the gain from the whole 4 transactions into 2 categories: Total Ordinary Gain & Total LTCG Your answer: Question 1 For a) and b), fill out this table Assets Furniture 2/14/21 Equipment 2/1/21 Warehouse 1/1/21 1/1/21 Land Purchased Date Land Cost 12/31/20 For c) and d), fill out the table below Assets Sold date: Furniture Equipment 12/31/20 Warehouse 12/31/20 12/31/20 20k 100k 50k 150k Convention (half Asset life (years) year or mid-month) half-year half-year half-year half-year Sold price 10k 20K 55k 200K 14629 61600 1.88 40000 150000 1.92 2 Gain/Loss Adjusted basis (from recognized table above) 2 -7500 -4629 -41600 15000 Depreciation Depreciation year 1 (2021) year 2 (2022) 2514 18400 5000 Characters ordinary ordinary 1231, 1245 1231 2857 20000 5000 Acc. Total Depreciation 5371 38400 10000 Explanation for characters Adjusted Basis 14629 61600 40000 150k For e), fill out this table Assets Sold price Furniture Equipment 20k Warehouse 55k Land 10k 200k For f) fill out this table Total ordinary gain/loss Total LTCG Total accumulated depreciation (from above) 5371 38400 10000 0 Amount Adjusted basis (from above) 14629 61600 40000 150000 Explanation Gain/Loss recognized (from above) -7500 -4629 -41600 15000 Characters Depreciation recapture (from) above) ordinary ordinary 1231,1245 1231 Net $1231 (sum of the "Enter $1231 netting" column) Enter $1231) netting

Answer rating: 100% (QA)

St... View the full answer