PRINCIPLES OF TAXATION F/BUS.+INVEST.
22nd Edition
ISBN: 9781259917097
Author: Jones
Publisher: MCG
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Question
Chapter 8, Problem 16AP
a.
To determine
Ascertain the amount and character of Firm J’s gain or loss realized on sale of the (1) asset and (2) receivable, by assuming that the asset is an inventory item.
b.
To determine
Ascertain the amount and character of Firm J’s gain or loss realized on sale of the (1) asset and (2) receivable, by assuming that the asset is a capital asset.
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Students have asked these similar questions
TPW, a calendar year taxpayer, sold land with a $535,000 tax basis for $750,000 in February. The purchaser paid $75,000 cash at closing and gave TPW an interest-bearing note for the $675,000 remaining price. In August, TPW received a $55,950 payment from the purchaser consisting of a $33,750 principal payment and a $22,200 interest payment.
* I only need Requirement C (box 2) to be solved.
Required:
c. Compute gain recognized in the year of sale if TPW uses the installment sale method of accounting. Compute TPW’s tax basis in the note at the end of the year.
TPW, a calendar year taxpayer, sold land with a $540,000 tax basis for $775,000 in February. The purchaser paid $80,000 cash at closing and gave TPW an interest-bearing note for the $695,000 remaining price. In August, TPW received a $57,550 payment from the purchaser consisting of a $34,750 principal payment and a $22,800 interest payment. Assume that TPW uses the installment sale method of accounting.
Required:
Compute the difference between TPW’s book and tax income resulting from the installment sale method.
Is this difference favorable or unfavorable?
Using a 21 percent tax rate, compute PTR’s deferred tax asset or liability (identify which) resulting from the book/tax difference.
A taxpayer’s business sells inventory for $80,000. The adjusted basis of the property is $58,000 at the time of the sale and the inventory had been held for more than one year. The taxpayer has:
Sold a short-term capital asset.
No gain or loss.
Sold a long-term capital asset.
An ordinary gain (ordinary income).
Chapter 8 Solutions
PRINCIPLES OF TAXATION F/BUS.+INVEST.
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