A Business Taxpayer Sold All the Depreciable Assets of the Business

question 73

Essay

A business taxpayer sold all the depreciable assets of the business, calculated the gains and losses, and would like to know the final character of those gains and losses.The taxpayer had $353,000 of adjusted gross income before considering the gains and losses from sale of the business assets.The taxpayer had unrecaptured § 1231 lookback loss of $22,000.What is the treatment of the gains and losses summarized in the chart below after all possible netting and reclassification has been completed? What is the taxpayer's adjusted gross income? (Ignore the self-employment tax deduction.) $$\begin{array} { l c c c c } \text { Asset } & \text { Purchase Date } & \text { Sale Date } & \text { Depreciation } & \text { Gain (Loss) } \\\text { Machine \#1 } & 10 / 10 / 15 & 11 / 11 / 17 & \$ 323,000 & \$ 66,000 \\\text { Machine \#2 } & 10 / 02 / 14 & 11 / 11 / 17 & 65,000 & ( 15,000 ) \\\text { Machine \#3 } & 09 / 23 / 13 & 11 / 11 / 17 & 183,000 & 23,000 \\\text { Machine \#4 } & 09 / 23 / 13 & 11 / 11 / 17 & 28,000 & 34,000\end{array}$$

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Definitions:

Functional Areas

Divisions within a business or organization that specialize in particular tasks or operations, such as marketing, finance, or production.

Integrity

The quality of being honest and holding strong moral principles; often considered a foundational attribute in professional and personal conduct.

Synergy

Synergy refers to the increased effectiveness or improved results achieved when two or more elements (such as individuals, organizations, or systems) work together compared to working independently.

Values

One’s moral code of conduct toward others: created through integrity, trust, and character.