Professar Kenneth C Brown ‘ACC 364— Spring 2016 Practice Problems Chapters 7&8 1). Shannon has a manufacturing business with @ calendar year end. In March of 2018, ‘Shannon purchased $ 1,900,000 in manufacturing machinery & equipment for her new business. Shannon wants to conserve her capital, and therefore wants to pay the least amount of tax legally possible. Compute the maximum cost recovery available for year 4, and the adjusted basis at the end of the year. ip ieee ee Prchasce Perce #1 geycoe x 4a % MACRS 7 TAR < sev, 00 > Section #14 < £00, 2007 OM macas Depo stun 7, 790,060 Total Cost Recovery Depectron pane epe ec autnieeie cael Ze vee > @ 1, 300, 308 Crea 63) Se ae £94,900 Adsesteo Bass 2) Several years ago, Nipher paid $70,000 to purchase equipment to use in its business. This year, it sold the equipment for $76,500. Accumulated MACRS depreciation through date of sale was $18,000. Determine the amount and character of Nipher's gain recognized Ee Y Pru . ¥ 76, S00 Purchase Pee 2 ¥ 7,000 Sale s, Arieshe Basis maces Pireciatin: << 1808 8 > GAin Real2ar Abisko Bass © S2,c08 oromara Crecaptie) 0 18,008 S31 ¥ 500 3) Firm F purchased a commercial office building for business use in 2004 for $965,000. This year, the firm sold the building for $1 milion. Accumulated MACRS depreciation through date of sale was $275,000. Which of the following statements is true? ‘Compute the components of Firm F's gain if Firm F is a corporation. Rrchase Fices BF eS, 000 Sale Puce? #1, 002,000 Apivsten Bass 4 640, 0007 eee Gain Reah2co 3/0, cao Bosesten Bass # 690,000 erdinamt Cats ecev20%) +5 000 What is the result if Firm F is NOT a corporation? 12%) ( 3/0,000~S av) “2255; 000 on ee Recaptere Bees wit ApphtProfessor Kenneth C Brown ACC 364 — Spring 2016 Practice Problems Chapters 7&8 4) In 2015, Mary recognized a $45,000 gain on the sale of Section 1231 property. Over the previous five-year period, Mary recognized the following net Section 1231 gains and (losses): 2014 $(28,000) 2013 $16,000 2012 $(30,000) Mary's 2015 gain is characterized as HY, 000 UsAecovere a 1241 toss 2012-%%( 3e,000 = /e,eoe) Urecan oe bess aot Jobat 1231 eupecapows 105s e374 She 6 2,000 OraRAM FS 560 g Zvec 8/230, 5) Michael sold machinery sed in his business for $50,000. He purchased the equipment three years ago for $55,000 and deducted $22,800 MACRS depreciation through the date of sale. Compute and characterize Michaels gain on sale. i Porchave Pres © £5000 ea ceaearee 7 Aojvifeyd BASS! < 32.2007 Mmacas Pepecko: 22, Boe : 0 ; ——— Gain Realaen © Rojsho Baus 35 206 oS eas - Bou pivre Caw rechzes (117, Boo) © Recar 22, G00) Gnw ® P17 BRO CV AKArY 6) Dolzer Inc, sold a business asset with a $474,000 adjusted book and tax basis for $775,000. ‘The purchaser paid $100,000 in cash and gave Doizer a note for the $675,000 balance of the price. Dolzer will not receive a payment on the note until next year. Assuming that Dolzer uses the installment sale method, compute tax gain recognized in the year of sale, Gross Plt % + B30! 000 33 5y% Sale Pre 478,000 Abs Basis | #77, 000 > 38,890 Cais Reataco Gad % Bei, 0 Recognieh 9100, 000% 3B. 84 % Gain Deku = 262140 HOTS oovx 3H. 81% Gaia Readerehs