What is the treatment of the gains and losses

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Question - Alan sold all the depreciable assets of his business, calculated the gains and losses, and would like to know the final character of those gains and losses. Alan had $307,000 of adjusted gross income before considering the gains and losses from sale of the business assets. He had an unrecaptured §1231 lookback loss of $7,000.

Asset

Purchase Date

Sale Date

Depreciation

Gain (Loss)

Machine #1

10/10/18

11/11/20

$250,000

$61,000

Machine #2

10/02/18

11/11/20

54,000

(16,000)

Machine #3

09/23/16

11/11/20

175,000

32,000

Machine #4

09/23/16

11/11/20

30,000

58,000

Answer each of the following questions. Be sure to show and label all calculations.

-Identify the initial classification/type of the gain or loss for each machine.

-What is the treatment of the gains and losses summarized in the chart below after all possible netting and reclassification has been completed?

-What is the taxpayer's adjusted gross income (AGI)?

-Specify whether ordinary or preferential rates apply to each component of AGI.

Reference no: EM133025901

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