Loose Leaf for McGraw-Hill's Taxation of Individuals and Business Entities 2019 Edition
10th Edition
ISBN: 9781260189728
Author: Brian C. Spilker Professor, Benjamin C. Ayers, John Robinson Professor, Edmund Outslay Professor, Ronald G. Worsham Associate Professor, John A. Barrick Assistant Professor, Connie Weaver
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 11, Problem 52P
Tonya Jefferson (single), a sole proprietor, runs a successful lobbying business in Washington, DC. She doesn’t sell many business assets, but she is planning on retiring and selling her historic townhouse, from which she runs her business, to buy a place somewhere sunny and warm. Tonya’s townhouse is worth $1,000,000 and the land is worth another $1,000,000. The original basis in the townhouse was $600,000, and she has claimed $250,000 of
- a) What amount of gain or loss does Tonya recognize on the sale? What is the character of the gain or loss? What effect does the gain or loss have on her tax liability?
- b) In addition to the original facts, assume that Tonya reports the following nonrecaptured net §1231 loss:
What amount of gain or loss does Tonya recognize on the sale? What is the character of the gain or loss? What effect does the gain or loss have on her year 6 (the current year) tax liability?
- c) As Tonya’s tax adviser, you suggest that Tonya sell the townhouse in year 7 in order to reduce her taxes. What amount of gain or loss does Tonya recognize on the sale in year 7?
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[The following information applies to the questions displayed below.]Tonya Jefferson (single), a sole proprietor, runs a successful lobbying business in Washington, DC. She doesn't sell many business assets, but she is planning on retiring and selling her historic townhouse, from which she runs her business, to buy a place somewhere sunny and warm. Tonya's townhouse is worth $1,000,000 and the land is worth another $1,000,000. The original basis in the townhouse was $600,000, and she has claimed $250,000 of depreciation deductions against the asset over the years. The original basis in the land was $500,000. Tonya has located a buyer that would like to finalize the transaction in December of the current year. Tonya's marginal ordinary income tax rate is 35 percent, and her capital gains tax rate is 20 percent.
b. In addition to the original facts, assume that Tonya reports the following nonrecaptured net §1231 loss:
Year
Net §1231 Gains/(Losses)
Year 1
$ (200,000)
Year…
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Chapter 11 Solutions
Loose Leaf for McGraw-Hill's Taxation of Individuals and Business Entities 2019 Edition
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