PRINCIPLES OF TAXATION F/BUS...(LL)
23rd Edition
ISBN: 9781260433197
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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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.
TPW, a calendar year taxpayer, sold land with a $549,000 tax basis for $845,000 in February. The purchaser paid $84,500 cash at closing and gave TPW an interest-bearing note for the $760,500 remaining price. In August, TPW received a $60,825 payment from the purchaser consisting of a $38,025 principal payment and a $22,800 interest payment. In the first year after the year of sale, TPW received payments totaling $116,650 from the purchaser. The total consisted of $76,050 principal payments and $40,600 interest payments.
Required:
For the first year after the year of sale, 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, determine the effect of the difference on the deferred tax asset or liability generated in the year of sale.
A business taxpayer 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 more than one year. The taxpayer has:
a.Sold a long-term capital asset.
b.An ordinary gain.
c.Sold a short-term capital asset.
d.No gain or loss.
Chapter 8 Solutions
PRINCIPLES OF TAXATION F/BUS...(LL)
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