Question

Facts Cost Eva Corp generated $100,000 of income from business operations. In addition, Eva Corp sold the following assets All were held more than 12 months. Warehouse depreciation all straight line. Acc Dpn Sales Procceds 19.000 1999 Questions : Two2 Calculate gain or loss on each asset. Machinery $90,000 $21,000 $50,000 12 31 Chapte) Detemine character of gains and losses Equipment 100,000 80,000 70,000 1231 Afgan Calculate taxable income Warehouse 400,000 100,000 500,000 200.000 g at figure out lepreciation Investment securities 70,000 100,000 Đ Land held for investment 150,000 100,000 Capitalbic inpstment In the prior year, Eva Corp had a net Section 1231 loss of $ 30,000.

Answer 1

Particulars	Cost	Depreciation	Net Block	sale	Gain / ( Loss )	Remarks
Machinery	90,000	21,000	69,000	50,000	(19,000)	Section 1231 Loss can offset against ordinary income
equipment	100,000	80,000	20,000	70,000	50,000	Taxed as Capital Gains
Warehouse	400,000	100,000	300,000	500,000	200,000	Taxed as Capital Gains
Investment securities	70,000		70,000	100,000	30,000	Taxed as Capital Gains
Land held for investment	150,000		150,000	100,000	(50,000)	Section 1231 Loss can offset against ordinary income

Capital gain is taxed from sale of assets at the lower rate but loss from sale of capital asset as per section 1231 will be setoff against normal gains.

Net income of the business	100000
Loss from Machinery	(19,000)
Loss from sale of land	(50,000)
Ordinary income	31000

Other income are capital gains which will be taxed as per capital gains.