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:
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Property
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In Service
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Original Cost
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Recovery Period
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Furniture
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6/16/2016
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$5,000
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7 yrs
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Equipment
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10/23/2016
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$22,000
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5 yrs
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Machine
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7/21/2017
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$650,000
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7 yrs
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Auto (80% business use)
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8/3/2017
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$28,000
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5 yrs
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Office Building
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12/12/2017
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$2,099,000
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?
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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:
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Asset
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Sales Price
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Equipment
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$14,500
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Machine
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$706,000
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Office Building
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$2,105,000
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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:
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Descript.
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Orig Cost
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§179 expense
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Bonus Depreciation
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MACRS Depreciable Basis
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2016 Depreciation
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2017
Depreciation
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2018 Depreciation
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Total Cost Recovery
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Furn
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Equip
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Machine
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Auto
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Building
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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:
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Descript.
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Orig Cost
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Total Cost Recovery
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Adjusted Basis
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Equip
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Machine
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Bldg
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Using the given amount realized and the previously computed adjusted bases, you can compute the realized and recognized gain/loss for each property:
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Equip
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Machine
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Bldg
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Amount realized
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Basis
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Realized Gain/(Loss)
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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.
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Total Cost Recovery from date placed in service thru end of 2018
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Furniture
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$
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Auto
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$
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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
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Recognized Gain/(Loss)
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Character
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Equipment
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Machine
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Building
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Attachment:- Assignment File.rar