Problem
Andrea owns a small company that produces facial masks. Thanks to COVID-19, her business was booming at the beginning of 2020. But by the end of 2022, since the need for facial masks is no longer there, Andrea decided to close her business. The first step to closing her business involves selling off business assets. Below are her assets transaction info
|
Assets
|
Purchased Date
|
Cost
|
Sold Date
|
Sold price
|
|
Furniture
|
2/14/21
|
20k
|
12/31/22
|
10k
|
|
Equipment
|
2/1/21
|
100k
|
12/31/22
|
20k
|
|
Warehouse
|
1/1/21
|
50k
|
12/31/22
|
55k
|
|
Land
|
1/1/21
|
150k
|
12/31/22
|
200k
|
NOTE: Assume there is no §179 and Bonus depreciation. Use MACRS only for the depreciation
A. Calculate the total accumulated depreciation of each asset until the sold date (12/31/22).
Hint: Review Class 15 material
B. Calculate the Adjusted basis for each asset
C. Calculate the Gain/Loss Recognized for each asset.
D. Point out the exact character of gain/loss for each asset gain/loss
(ex: Ordinary, pure 1231, 1245, 1250, etc.)
E. Calculate the Net 1231 Gain/Loss
Hint: Be aware of the 1245 Depreciation recapture and 1231 lookback rules
F. Characterize the gain from the whole 4 transactions into 2 categories: Total Ordinary Gain & Total LTCG