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

question 27

Multiple Choice

Brandon,an individual,began business four years ago and has never sold a §1231 asset.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)$7,000 ordinary income,$1,000 §1231 loss and $2,100 tax liability.
• B)$6,000 ordinary income and $2,100 tax liability.
• C)$7,000 §1231 gain and $2,450 tax liability.
• D)$7,000 §1231 gain and $1,050 tax liability.
• E)None of thesE.The depreciation recapture of $7,000 becomes ordinary income.The $4,000 §1231 loss becomes an ordinary loss and offsets the $3,000 §1231 gain on the machinery.The $1,000 net §1231 loss becomes ordinary and offsets the $7,000 ordinary gain.The remaining ordinary gain of $6,000 is taxed at 35 percent which results in $2,100 of tax.

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Definitions:

Relationship-based

An approach focusing on building and maintaining positive connections with individuals or entities.

Push-Pull Strategy

A marketing strategy that combines both push tactics, aimed at directly influencing distributors or retailers, and pull tactics, aimed at enticing consumers towards the product.

Sales Forecast

An estimation of the expected sales for a particular period in the future, based on historical data, market analysis, and other factors.

Supply Chain

The interconnected network of entities, including suppliers, manufacturers, and distributors, involved in producing and delivering a product or service to the end consumer.