Andrew,an Individual,began Business Four Years Ago and Has Never Sold

question 30

Essay

Andrew,an individual,began business four years ago and has never sold a §1231 asset.Andrew owned each of the assets for several years.In the current year,Andrew sold the following business assets:
$\begin{array}{lccc}&&\text { Accumulated }\\\text {Asset}&\text { Original Cost } & \text { Depreciation } & {\text { Gain/Loss }} \\\text {Machinery}&\$ 12,000& \$ 7,000 & \$ 6,000 \\\text {Furniture}&10,000& 2,000 & 3,000 \\\text {Building}&90,000 & 20,000 & (5,000)\end{array}$ Assuming Andrew's marginal ordinary income tax rate is 32 percent,what is the character of the gains and losses and what affect do they have on Andrew's tax liability?

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