This year, Sigma, Incorporated generated $612,000 income from its routine business operations. In addition, the corporation sold the following assets, all of which were held for more than 12 months: Initial Basis Accumulated Depreciation* Sale Price Marketable securities $ 144,000 $ 0 $ 64,000 Production equipment 93,000 76,000 30,000 Business realty: Land 165,000 0 180,000 Building 200,000 58,300 210,000 *Through date of sale. Required: a. Compute Sigma’s taxable income assuming that it used the straight-line method to calculate depreciation on the building and has no nonrecaptured Section 1231 losses. b. Recompute taxable income assuming that Sigma sold the securities for $150,000 rather than $64,000.
This year, Sigma, Incorporated generated $612,000 income from its routine business
operations. In addition, the corporation sold the following assets, all of which were
held for more than 12 months:
Initial Basis
Accumulated
Marketable securities $ 144,000 $ 0 $ 64,000
Production equipment 93,000 76,000 30,000
Business realty:
Land 165,000 0 180,000
Building 200,000 58,300 210,000
*Through date of sale.
Required:
a. Compute Sigma’s taxable income assuming that it used the straight-line method to
calculate depreciation on the building and has no nonrecaptured Section 1231
losses.
b. Recompute taxable income assuming that Sigma sold the securities for $150,000
rather than $64,000.
INTRODUCTION:
Taxable income is any remuneration received by an individual or corporation that is used to calculate tax liabilities. The total income amount, also known as gross income, is used to compute how much the individual or company owes the government for the tax period in question.
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