Problem 17-39 (10. 2, 3) On December 1, 2020, Lavender Manufacturing Company (a corporation) purchased another company's assets, including a patent. The patent was used in Lavender's manufacturing operations; $49,500 was allocated to the patent, and it was amortized at the rate of 5275 per month. On July 30, 2022, Lavender sold the patent for $95,000. Twenty months of amortization had been taken on the patent. a. What are the amount and nature of the gain Lavender recognizes on the dlsposition of the patent? Lavender has ? x ol due to 53245 recapture and: x of 1231 Fandhack Check My Work structural components generally are not 1245 property. The following property is also subject to 51245 treatment: Amortizable personal property such as goodwill, patents, copyrights, and latanolds of 53745 property. The Code contains two major rerapture provisions, 5 5 1245 and 1250 . These provisions cause gain to be treated initially as ordinary gain. b. Complete the letter to Lavender's controller, Bill Cubit, discussing the treatment of the gain. vea I", buen. Thank you for the opportunity to respond to your question concerning the tax treatment of the from the disposition of the patent. As you know, amortization of $275 per month has been taken on this patent since it was acquired on December 1 , 2020. That amortization totaled : x when you disposed of the patent on July 30, 2022. This amount is toxable as x, because it is recaptured by v. The balance of the V is 1231, and it will b. Complete the letter to Lavender's controller, Bill Cubit, discussing the treatment of the gain. SWFT, LLP 5191 Natorp Boulevard Mason, OH 45040 November 23, 2022 Mr. Bill Cubit, Controller Lavender Manufacturing Company 6734 Grover Street Boothbay Harbor, ME 04538 Dear Mr. Cubit: Thank you for the opportunity to respond to your question concerning the tax treatment of the from the disposition of the patent. As you know, amortization of $275 per month has been taken on this patent since it was acquired on December 1 , 2020. That amortization totaled X when you disposed of the patent on July 30, 2022. This amount is taxable as X, because it is recaptured by . The balance of the is 1231, and it will be taxed as , as no other business property dispositions have occurred this year. If you have any questions concerning this transaction or other tax matters, please feel free to contact me. Sincerely, Rose Goodwin, CPA Partner