Reference no: EM132372269
Question 1. Grass Inc. sold equipment used in its business for $29,000 May 5, 2019. The equipment was purchased on April 1, 2014 for S27,000 and the accumulated depreciation at the time of the sale is $24,590. Grass also sold 8 acres of land held as an investment that was purchased on September 15, 2005 for $62,000 and sold on November 1, 2019 for $55,000. These are the only property transactions for Grass during 2019. How will Grass Inc. report these two transactions on its 2019 tax return? Be sure to include the character of the gain or loss and any other relevant information concerning the transactions.
Question 2. Concrete Inc. incurred the following property transactions during 2019:
| §1231 gain from the sale of a building |
$110,000 |
| §291 gain from sale of a building |
$28,000 |
| §1231 loss from the sale of equipment |
$97,000 |
| §1245 gain from the sale of machinery |
$32,000 |
| Long-term capital loss |
($17,500) |
| Long-term capital gain |
$28,000 |
| Short-term capital loss |
($4,500) |
| Short-term capital loss carryforward from 2016 |
($9,000) |
| Short-term capital loss carryforward from 2012 |
($6,000) |
| §1231(c) unrecaptured §1231 losses from the prior 5 years |
($8,000) |
Concrete Inc. has taxable income of $275,000 before consideration of the property transactions listed above.
• What is Concrete Inc.'s taxable income for 2019?
• What is Concrete's net capital gain for 2019?
Question 3. On September 9, 2019 Ranch Inc. sold 40 acres of land used in its cattle operations for $480,000. The land was purchased on July 10, 2010 for $225,000. The buyer paid $200,000 of cash, took the property subject to a mortgage of $230,000, and gave Ranch Inc. a note receivable for $50,000. The note receivable bears an adequate interest (paid annually) and the full amount owed will be paid on September 9, 2022.
• How much is the realized and recognized gain for 2019 (assuming Ranch defers as much gain as possible to a future tax year)?
• What is the character of the gain?