Question

gains and losses are $1231 ke your determination prior PROBLEMS 17-26 Characterizing Assets. Indicate whether the following gains and losse gains or losses or capital gains and losses or neither. Make your deter to the $ 1231 netting process. 2. Printing press used in A's business; held for three years and sold at a les b. Goodwill sold as part of the sale of B's business. c. Vacant lot used five years as a parking lot in C's business; sold at a gain. d. House, 80% of which is D's home and 20% of which is used as a place of business; held 15 years and sold at a gain. e. Camera used in E's business; held for 10 months and sold at a gain. f. Land used by F for 10 years as a farm and sold at a loss. g. Personal residence sold at a loss.

Answer 1

a. The printing press used in A's business is a depreciable asset and has been used in the business for more than 1 year,hence, the loss is 1231 loss.

b. Goodwill can be treated as 1231 asset only if it was purchased.Since, it is not clear that goodwill was not self created,it would not be treated as 1231 gain/loss.Since it has been sold as part of business the gain/loss would treated as ordinary gain/loss. It is neither 1231 gain/loss nor capital gain/loss.

c. Since the asset is used in business for more than one year,the gain would be treated as 1231 gain and taxed at lower capital gains rate.

d. Personal property held for a period greater than one year and used partly of business and partly for personal use is not 1231 asset.Hence,the gain on sale of building which was held for 15 years would be treated capital gains.

e. Camera,used in business, was held for less than 1 year. It is neither 1231 gain nor capital gain.

f. Farmland used for 10 years is a real property held for more than 1 year.The loss on sale of such farm is 1231 loss.

g. Personal residence does not qualify as 1231 asset.Loss on sale of personal property would be treated as capital gains.