R Realized a Gain of $10,000 on a Fire That

question 32

Multiple Choice

R realized a gain of $10,000 on a fire that destroyed part of a warehouse.R also sold several assets during the current taxable year as follows: Business use equipment held three years $ 3,000 gain
Investment land held 15 years 12,000 gain
Travel trailer used for personal trips 4,000 loss
The depreciation allowed on the equipment was $6,500 and was calculated using the straight line method.Assuming R's taxable income is $70,000 before these transactions, what is his taxable income for the year (assuming these items do not affect any other deductions) ?

• A)$95,000, $25,000 of which is long-term capital gain
• B)$91,000, $ 18,000 of which is long-term capital gain
• C)$95,000, $22,000 of which is long-term capital gain
• D)$95,000, $12,000 of which is long-term capital gain

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Definitions:

Operating Income

The profit realized from a business's core operations, excluding deductions of interest and taxes.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, providing a more useful comparison to actual costs.

Variable Costs

Expenses that fluctuate directly with changes in production volume or activity level, such as raw materials and direct labor costs.

Flexible Budgets

Budgets that can adjust or flex for changes in the volume of activity or other relevant factors, allowing for more accurate forecasts and analysis.