Reference no: EM131924447

Assignment -

This is the Sale of Business Property Assignment. You are using Version B.

Use the information below to compute cost recovery and the gain/loss from the sale of property along with a description of the character of the gain or loss for each.

Zelda, a calendar year corporation, made the following (and only) purchases of property:

Property	In Service	Original Cost	Recovery Period
Furniture	6/16/2016	$5,000	7 yrs
Equipment	10/23/2016	$22,000	5 yrs
Machine	7/21/2017	$650,000	7 yrs
Auto (80% business use)	8/3/2017	$28,000	5 yrs
Office Building	12/12/2017	$2,099,000	?

In 2016, Zelda did not elect any §179 expensing or bonus depreciation. In 2017, Zelda took as much §179 deduction as allowable on the longest life asset eligible. On July 22, 2018, Zelda sold the following property for the following sales prices:

Asset	Sales Price
Equipment	$14,500
Machine	$706,000
Office Building	$2,105,000

In 2016, net §1231 ordinary losses of $35,000 were recognized. Zelda's taxable income is in the tens of millions each year. Assume a tax rate of 35%.

You are going to compute cost recovery and any gain/loss realized and recognized for this property. You can use the tables below or show your work in some other way. It must be reasonably easy to follow and include descriptions so it can be graded.

You may want to start with the depreciation calculation:

Descript.	Orig Cost	§179 expense	Bonus Depreciation	MACRS Depreciable Basis	2016 Depreciation	2017 Depreciation	2018 Depreciation	Total Cost Recovery
Furn
Equip
Machine
Auto
Building

You can use the information above to provide the total cost recovery for the furniture and auto in the answers section below. You should also use the cost recovery information to compute adjusted bases:

Descript.	Orig Cost	Total Cost Recovery	Adjusted Basis
Equip
Machine
Bldg

Using the given amount realized and the previously computed adjusted bases, you can compute the realized and recognized gain/loss for each property:

	Equip	Machine	Bldg
Amount realized
Basis
Realized Gain/(Loss)

You will need to provide the character of each gain or loss. For maximum credit, provide an explanation of how you determine the character of each gain or loss and note that some properties may results in more than one character so provide the amount and character for each. You final answers can be provided in the answer boxes below.

Your final solutions:

In the boxes below please provide the total cost recovery for the furniture and the auto through te end of 2018.

	Total Cost Recovery from date placed in service thru end of 2018
Furniture	$
Auto	$

In the boxes below, provide (a) the amount of recognized gains or loss and (b) the character(s) (e.g., ordinary or capital due to §291, §1245, §1250, §1231, etc.) of the gain or loss (after applying any netting conventions) for the below listed properties

	Recognized Gain/(Loss)	Character
Equipment
Machine
Building

Attachment:- Assignment File.rar