Charmine, a Single Taxpayer with No Dependents, Has Already Incurred

question 39

Essay

Charmine, a single taxpayer with no dependents, has already incurred a $10,000 § 1231 gain in 2017 and has no § 1231 lookback losses. The taxpayer purchased a business machine for $100,000 five years ago, $70,000 of depreciation has been taken on it, and the machine is now worth $90,000. How will the net § 1231 gain or loss be affected if the taxpayer trades in the business machine for a like-kind business machine and pays an additional $12,000 in cash to obtain the replacement machine? If Charmine already has $352,000 of taxable income which does not include a $10,000 § 1231 gain or any capital gains or losses, what is her taxable income?

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Definitions:

Hypokalemia

A medical condition characterized by lower-than-normal levels of potassium in the bloodstream, which can affect heart and muscular function.

Laxatives

Substances that promote bowel movements and are used to treat or prevent constipation, often by softening stools or increasing their passage through the bowels.

Refeeding

The process of gradually reintroducing food after a period of malnutrition or starvation, aiming to prevent refeeding syndrome.