Question

Required information The following information applies to the questions displayed below WAR (We Are Richj has been in business since 1985 WAR is an accrual method sole proprietorship that deals in the manufacturing and wholesaling of various types of golf equipment Hack & Hack CPAs has filed accurate tax returns for WAR's owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with the owner of WAR-Mr. Someday Woods (single). However, in early 2018, Jack Hack and Someday Woods played a round of golf and Jack, for the first time ever, actually beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired you to compute his 2018 taxable income. Mr. Woods was able to provide you with the following information from prior tax returns. The taxable income numbers reflect the results from all of Mt. Wood's activities except for the items separately stated. You will need to consider how to handle the separately stated items for tax purposes. Also, note that the 2013-2017 numbers do not reflect capital loss carryovers 20132014 2015 2016 2017 Ordinary taxable incone Other itens not included in ordinary taxable income: Net gain (loss) on disposition of $1231 assets Net long-term capital gain (loss) 4,000 $ 2,000 $94,000 $170,000 $250,e0e s3,00010,000 s (15,e00) $1,000 $(7,000) s (6,e00) on disposítion of capital assets s (7,000) In 2018, Mr. Woods had taxable income in the amount of $480.000 before considering the following events and transactions that transpired in 2018: a. On January 1, 2018, WAR purchased a plot of land for $100.000 with the intention of creating a driving range where b On August 17, 2018. WAR sold its goif testing machine, "Tron Byron" and replaced it with a new machine "Iron Tiger c. In the months October through December 2018, WAR sold various assets to come up with the funds necessary to patrons could test their new golf equipment. WAR never got around to building the driving range, instead, WAR sold the land on October 1, 2018, for $40.000 Iron Byron" was purchased and installed for a total cost of $22.000 on February 5, 2014. At the time of sale, "Iron Byron" had an adjusted tax basis of $4,000. WAR sold "iron Byron" for $25,000 invest in WAR's latest and greatest invent three-dimple golf bail. Data on these assets are provided below

this is for an advanced tax accounting course

Answer 1

Answer - Calculation of Taxable income

- the table below reflects the impact of Mr.Wood's asset disposition on his taxable income for the year :

Items	Amount	Notes	Character
Total income before adjustment	$480,000		Ordinary
Loss from sale of Land held <1year	(60,000)	A	Ordinary
Sec 1245 recapture	18,440	B	Ordinary
Sec 1240 recapture	0	C
Sec 1231 gain recaptured as ordinary	6,000	D	Ordinary
Net Sec 1231 gain	156,000	D	Capital
Net LTCG from investments	9,000	E	Capital
Capital Loss - forwards	(3,000)	F	Capital
TI after adjustments	$606,440

Notes - Received $100,000 for property with a $40,000 basis resulting in a $60,000 loss. Because the property was not held for more than one year, it is not Sec 1231 property and loss is ordinary