Brandon, an individual, began business four years ago and has sold 1231 assets with $5,600 of losses within the last 5 years. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets: Original Accumulated Asset Cost Depreciation Gain/Loss Machinery $ 31,200 $ 8,200 $ 10,600 Land 52,000 0 26,000 Building 114,000 32,000 - 17,000 Assuming Brandon’s marginal ordinary income tax rate is 32 percent, what effect do the gains and losses have on Brandon’s tax liability? Multiple Choice ____ $19,600 ordinary income, $6,272 tax liability. ____ $19,600 1231 gain and $2,940 tax liability. ____ $5,800 1231 gain, $13,800 ordinary income, and $5,286 tax liability. ____ $13,800 1231 gain, $5,800 ordinary income, and $3,926 tax liability. ____ None of the choices are correct.
Brandon, an individual, began business four years ago and has sold 1231 assets with $5,600 of losses within the last 5 years. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets:
Original Accumulated
Asset Cost
Machinery $ 31,200 $ 8,200 $ 10,600
Land 52,000 0 26,000
Building 114,000 32,000 - 17,000
Assuming Brandon’s marginal ordinary income tax rate is 32 percent, what effect do the gains and losses have on Brandon’s tax liability?
Multiple Choice
____ $19,600 ordinary income, $6,272 tax liability.
____ $19,600 1231 gain and $2,940 tax liability.
____ $5,800 1231 gain, $13,800 ordinary income, and $5,286 tax liability.
____ $13,800 1231 gain, $5,800 ordinary income, and $3,926 tax liability.
____ None of the choices are correct.
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