In: Accounting
This year, Sigma Inc. generated $633,000 income from its routine
business operations. In addition, the corporation sold the
following assets, all of which were held for more than 12
months.
InitialBasis | Acc.Depr.* | Sale Price | ||||
Marketable securities | $ | 183,200 | $ | 0 | $ | 85,250 |
Production equipment | 108,400 | 86,720 | 35,500 | |||
Business realty: | ||||||
Land | 222,750 | 0 | 233,250 | |||
Building | 287,000 | 86,100 | 298,000 | |||
*Through date of sale.
Part A
Amount realized | Adjusted basis | realized gain /(loss) | ordinary gain/(loss) | section 1231gain/(loss) | |
Production equipment | 35500 | 21680 (108400-86720) | 13820 | 13820 | |
Business Land | 233250 | 222750 | 10500 | 10500 | |
Business building | 298000 | 200900 (287000-86100) | 97100 | 19420 (97100*20%) | 77680 (97100*80%) |
33240 | 88180 | ||||
Net income from operations | 633000 | |
Ordinary income from business assets | 33240 | |
Section 1231 gain (treated as capital gain) | 88180 | |
Sale of marketable securities : | ||
Amount realized | 85250 | |
Basis | (183200) | |
Realized loss | (97950) | |
Deductible loss limited to section 1231 gain | (88180) | |
Taxable income | 666240 | |
Part B
Net income from operations | 633000 | |
Ordinary income from business assets | 33240 | |
Section 1231 gain | 88180 | |
Sale of marketable securities: | ||
Amount realized | 186400 | |
Basis | (183200) | |
Capital gain | 3200 | |
Taxable income | 757620 | |