Question

Hauswirth Corporation sold (or exchanged) a warehouse in year 0. Hauswirth bought the warehouse several years ago for $84,500 and it has claimed $39,400 of depreciation expense against the building. (Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable. Round your final answers to the nearest whole dollar amount.) Required: a. Assuming that Hauswirth receives $58,200 in cash for the warehouse, compute the amount and character of Hauswirth's recognized gain or loss on the sale. b. Assuming that Hauswirth exchanges the warehouse in a like-kind exchange for some land with a fair market value of $58,200, compute Hauswirth's realized gain or loss, recognized gain or loss, deferred gain or loss, and basis in the new land. c. Assuming that Hauswirth receives $30,000 in cash in year O and a $64,500 note receivable that is payable in year 1, compute the amount and character of Hauswirth's gain or loss in year 0 and in year 1. (Round "Gross Profit Percentage" to 2 decimal places.)

Answer 1

Part A

Recognized gain/(loss)	$13100
Character of Recognized gain/(loss):
Ordinary gain/(loss)	$13100
§1231 gain/(loss)	$0

Description	Amount	Explanation
(1) Amount Realized	58200
(2) Original Basis	84500
(3) Accumulated Depreciation	(39400)
(4) Adjusted Basis	45100	(2) + (3)
(5) Gain (Loss) Recognized	13100	(1) – (4)
(6)Ordinary income (§1245 depreciation recapture)	13100	Lesser of (3) or (5)
§1231 gain	0	(5) – (6)

Part B

Gain realized	$13100
Gain recognized	$0
Deferred gain	13100
Adjusted basis in new property	$45100

Description	Amount	Explanation
(1) Amount Realized from equipment	58200
(2) Amount realized from boot (cash)	0
(3) Total amount realized	58200
(4) Adjusted Basis	45100	(84500-39400)
(5) Gain realized	$13100	(3) – (4)
(6) Gain recognized	$0	Lesser of (2) or (5)
(7) Deferred gain	13100	(5) – (6)
Adjusted basis in new property	$45100	(1) – (7)

Part C

Amount Realized	94500
Original Basis	84500
Accumulated Depreciation	(39400)
Adjusted Basis	45100
Gain (Loss) Realized	49400
Depreciation recapture	39400	Ordinary income
Gain eligible for installment reporting	10000
Gross profit percentage	10.58%
Installment gain (loss) in year 0	$3174	§1231 gain
Installment gain (loss) in year 1	$	§1231 gain

Description	Amount	Explanation
(1) Amount Realized	94500
(2) Original Basis	84500
(3) Accumulated Depreciation	(39400)
(4) Adjusted Basis	45100	(2) + (3)
(5) Realized Gain(Loss)	49400	(1) – (4)
(6)Ordinary income from §1245 depreciation recapture (not eligible for installment reporting)	39400	Ordinary income Lesser of (3) and (5)
(7) Gain eligible for installment reporting	10000	(5) – (6)
(8) Gross profit percentage	10.58%	(7) / (1)
(9) Payment received in year 0	30000
§1231 gain recognized in year 0	3174	(9) x (8) §1231 gain
(10) Payment received in year 1	64500
§1231 gain recognized in year 1	6824	(10) x (8) §1231 gain