Assignment 4
TX 602
Due: Monday, April 23 by 5PM via Turnitin
1245 Problem
On 1/1/2004 X Corporation purchased a new machine for $102,000. The machine was placed in service immediately that year and X elected to take additional first year depreciation of $2,000. X also took the 200% declining balance method of depreciation and a 10 year life. During 2005 the machine was not used to capacity and depreciation was not claimed. The machine was back in full service in 2006 and depreciation was claimed using the straight line method for the next five years. In December of 2010 the machine was sold for $100,000.
Cost 2004$102,000
179 Depreciation2,000
Depreciable Basis$100,000
Depreciation 200420,000
2005 -0-
2006 10,000
200710,000
200810,000
200910,000
201010,000
70,000
Adjusted Basis30,000
Sales Price100,000
1231 Gain $ 70,000
Question: Is this the correct amount of gain? If not, what is the correct gain or loss?
1250 Problem
Taxpayer X purchased an office building for $120,000 on 12/31/82 ($100,000 Building, $20,000 Land).
40 year life
0 salvage value
X sold the building for $128,000 on 1/1/91.
Accelerated Depreciation was as follows:
1983 $5,000
198489 24,000
1990 3,000
Total $32,000
If X had used S.L. depreciation he would have had an annual deduction of $2,500 and thus accumulated depreciation of $20,000.
Question: What is X's gain or loss and what is its character?
MACRS PROBLEM
On January 1, 1982, T purchased buildings A and B for $600,000 each. Building A is a factory and building B is an apartment house. T elects the 15year recovery period assigned to 1250 property and elects to write off the cost of each building pursuant to the tables prescribed by the IRS. For each building this results in a deduction of $430,000 by December 31, 1994.
(a)T sellsboth buildings on January 1, 1995 for $800,000each. What is the amount and character of his gain orloss?
(b)Suppose in (a), T had elected, pursuant to 168 (b) (3),to write off both buildings over their appropriate period (27.5 for residential and 39 years for commercial) using the straightline method?
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