Question

This year, SIgma Inc. generated $633,750 Income from Its routine business operations. In addition, the corporation sold the following assets, all of which were held for more than 12 months. InitiaL Acc Basis 11,5 88,488 31,see 171,758 Depr.Sale Price $ 69 , see 168,60e $ Marketable securities Production equipment Business realty: Land Building 21e,800 231 , see 234,eee 70 , 2ee Through date of sale. a. Compute Sigma's taxable Income assuming that it used the straight-line method to calculate depreciation on the building and has no nonrecaptured Section 1231 losses. b. Recompute taxable Income assuming that Sigma sold the securitles for $175,200 rather than $69,500.

Answer 1

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Answers are highlighted in yellow: Solution: Amount Adiusted Realized realized Basis Gain/-loss OrdinarySec.1231 Gain Gain/-loss $ 38,250 $ 92,410 Assets Production equipment Business Land Business Buildin Total 9400 $ 9,400 38250 upto depreciation recapture 31500 22100 210000 171750 231500 163800 67700 $ 13,540 $ 54,160 Balance 22,940 For real property, per section 291, section 1250 recapture will be 20% of lessor of accumulated depreciation or realized gan. 67700*20%) 13540 Net Income from Opeation Add: Ordinary gain Add: 1231 Gain Sale of marketable securities: Amount realized Basis Realized loss Deductible loss limited to Section 1231 gain Taxable Income 633750 $ 22,940 $ 92,410 69500 168600 99100 S -92,410 656690 a) Net Income from Opeation Add: Ordinary gain Add: 1231 Gain Sale of marketable securities: Amount realized Basis Capital gain per section 1231 633750 $ 22,940 $ 92,410 175200 168600 $ 6,600 755700 b) Taxable Income