Question

Hauswirth Corporation sold (or exchanged) a warehouse in year 0. Hauswirth bought the warehouse several years ago for $67,000 and it has claimed $33,000 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 $47,300 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 $47,300, 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 $26,000 in cash in year 0 and a $57,500 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.) Complete this question by entering your answers in the tabs below. Req a Reqb Reqc Assuming that Hauswirth receives $47,300 in cash for the warehouse, compute the amount and character of Hauswirth's recognized gain or loss on the sale. Recognized Gain/(Loss) Character of Recognized Gain/(Loss): Ordinary Gain/(Loss) $1231 gain (loss)

Answer 1

Purchase Price of Warehouse = $67,000

Depreciation claimed on Warehouse = $33,000

Therefore, Written Down Value (WDV) = $34,000 (67,000-33,000)

Req a) Sold the Warehouse for $47,300

Recognized Gain / (Loss)	$13,3300	(47,300-34,000)
Character of Recognised Gain/(Loss)	$13,300	(47,300-34,000)
Ordinary Gain /(Loss)	-$19,700	(67,000-47,300)
§1231 gain / (Loss)	$0	No long term gain/losses.

Req b) Linke kind exchange of warehouse for Land

Gain Realised	$0	Gain not realized as no amount received, but made an exchange for Land.
Gain Recognised	$13,300	(47,300-34,000)
Deffered Gain	$13,300	As Warehouse exchanged for Land, no amount to be taxed. but to be taxed at the time of sale with original purchase price of $67,000 or $34,000, as the case may be.
Adjusted basis on new Property	$19,700	As the WDV to be taken into consideration at the time of sale of this land property.

Req c) Received Cash at yr 0 and Bill receivable at yr 1

Gain Recognised	$49,500	(83,500-34,000)
Gain Received	$26,000	Amount received at yr 0
Character at yr 0	$0	As the amount received in current yr 0 is only $26,000 and it needs to be adjusted against the WDV for Warehouse.
Character at yr 1	$49,500	As receivable at yr 1 deducted by the remaining WDV.
Gross Gain / (loss) Percentage	59%	$49,500/$83500*100 i.e Amount received/receivable.