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

question 50

Essay

Charmine, a single taxpayer with no dependents, has already incurred a $10,000 § 1231 gain in 2019 and has no §
1231 lookback losses.She 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 Charmine 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:

Liquidated

The process of converting assets into cash, often during the closure of a business, or to settle debts.

Unanimous Written Consent

A document that officially records the agreement of all parties or directors on a decision, without the need for a formal meeting.

Limited Liability Partnership

A business structure that offers its owners limited personal liability for the debts and actions of the partnership, while operating with a flexible management structure.

Statutorily Required Filing

Refers to documents or submissions that must be filed according to law or statute.