Reference no: EM132718574
Question - Brandon, an individual, began business four years ago and has sold Section 1231 assets with $5,800 of losses within the last 5 years. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets:
Asset: Machinery
Original Cost: $31,600
Accumulated Depreciation: $8,600
Gain/Loss: $10,800
Asset: Land
Original Cost: $56,000
Accumulated Depreciation: $0
Gain/Loss: $28,000
Asset: Building
Original Cost: $122,000
Accumulated Depreciation: $36,000
Gain/Loss: ($21,000)
Assuming Brandon's marginal ordinary income tax rate is 32 percent, what effect do the gains and losses have on Brandon's tax liability?
a. $17,800 ordinary income, $5,696 tax liability
b. $17,800 Section 1231 gain and $2670 tax liability
c. $3,400 Section 1231 gain, $14,400 ordinary income, and $5,118 tax liability
d. $14,400 Section 1231 gain, $3,400 ordinary income, and $3,248 tax liability
e. None of the choices are correct
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