Brandon,an Individual,began Business Four Years Ago and Has Sold §1231

question 65

Multiple Choice

Brandon,an individual,began business four years ago and has sold §1231 assets with $5,000 of losses within the last 5 years.Brandon owned each of the assets for several years.In the current year,Brandon sold the following business assets: Assuming Brandon's marginal ordinary income tax rate is 35 percent,what effect do the gains and losses have on Brandon's tax liability?

• A) $25,000 ordinary income, $8,750 tax liability.
• B) $25,000 §1231 gain and $3,750 tax liability.
• C) $13,000 §1231 gain, $12,000 ordinary income, and $6,150 tax liability.
• D) $12,000 §1231 gain, $13,000 ordinary income, and $6,350 tax liability.
• E) None of the choices are correct.

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Definitions:

Petroleum

A naturally occurring, yellowish-black liquid found in geological formations beneath the Earth's surface, used primarily as a fuel source.

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