Category: Writing

1.Karen purchased a computer three years ago for $15,300 to
use exclusively in her business. She expense d the entire cost of the computer
under Sec. 179. If she sells the computer during the current year for $3,721,
what is the amount and charac ter of her recognized gain?

Jack ie purchases equipment during the current year for
$800,000 that has a seven-year MACRS recovery period. She expects to sell the
property after three years. Jack ie anticipates that her marginal tax rate in
the year of sale will be significantly higher than her current margina l tax
rate Why might it be advantageous for her to use the stra ight-line met hod of
depreciation?

1. When is livestock considered Sec. 1231 property?
2.When is a nee Sec. 1231 gain treated as ord inary income?
3. Carlie who is single has a Sec. 1231 gain of
$10,000 and no Sec. 1231 losses during the current year.
Explain wh y the gain might be taxed at
(a) 15%, (b) 37%, (c) 25%, (d) 20 %, or (e) zero

Explain how the gain from an involuntary conversion of
business property held more tha n one year is taxe d if the involuntary
conversion is the result of a condemnat ion. Explain the tax treat – ment if
the involuntary conversio n is due to a casualty

Alice owns timber, purchased six years ago, wit h an adjuste
d basis of $50,000. The timber is cut for use in her furniture business on
October 1, when the FMV of the timber is $200,000 . The FMV of the timber on
January 1 is $190,000 . May Alice treat any of the gain as Sec. 1231 gain? If
so, how much?

Joseph Allen, who is single, purchased his first house in
Orono, ME one year ago for $200,000 . Katahdin wants to purchase the house for
$360,000 . Refer to the regulations to determine if he may exclude part of the
gain in the following independent cases:
a. He has been unemployed for 16 months and has a chance to
start work for Penobscot Manufactur ing whose plant is located 62 miles from
Joseph ‘s home in Orono.
b. His dependent son, Ryan, has chronic asthma, and the
son’s doctor has advised Joseph that Ryan should live in a warm, dry climate to
mitigate the chronic asthma. Joseph and Ryan move to Nevada .
c. Joseph has become increasingly annoyed at the amount of
traffic in his neighborhood although the amount of traffic has not increased
much compared to the traffic when he purchased the house. A partial list of
research sources is:
• Reg. Sec. 1.121 -3(c), (d), and (e)

1.When a taxpa yer disposes of oil, gas, or geothermal
property, part or all of the gain may be recaptured as ordinary income. Explain
how the recapture amount is determined for oil and gas and geothermal
properties.
2. William owns nvo appreciated assets, land and a building,
which have been used in his trade or business since purchased in 1990. If he
sells the two assets to his 100% -owned corporation, will William have to
recognize any ordinary income? Explain.