On December 1, 2016, Lavender Manufacturing Company (a corporation) purchased another company's assets, including a patent. The
Question:
On December 1, 2016, 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 $275 per month. On July 30, 2018, Lavender sold the patent for $95,000. Twenty months of amortization liad been taken on the patent. What are the amount and nature of the gain Lavender recognizes on the disposition of the patent? Prepare your solution using Microsoft Excel (or a similar program). Write a letter to Lavender, discussing the treatment of the gain. Lavender’s address is 6734 Grover Street, Boodibay Harbor, ME 04538. The letter should be addressed to Bill Cubit, Controller.
Step by Step Answer:
The patent amortization is subject to 1245 r ecapture as ordinary income The balance of the gain is ...View the full answer
South-Western Federal Taxation 2019 Comprehensive
ISBN: 9781337703017
42th Edition
Authors: David M. Maloney, William A. Raabe, William H. Hoffman, James C. Young
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