Question

PLEASE DONT COPY WHAT IS ALREADY HERE

Pam and Joe each own 50% of Tucson LLC a limited liability company located in Tucson, AZ which was created in April of 2019. Tucson LLC provides veterinary services and uses the cash method of accounting. Pam and Joe have come to you on December 30, 2019 to ask your advice on some transactions they are considering.

Tucson's financial information is provided below:

Profit and Loss Statement January 1, 2019-December 30, 2019:

Gross Receipts:
Veterinary Services	$675,000
Expenses:
Salaries	$400,000
Utilities	$17,000
Depreciation	$15,000
Supplies	$75,000
Interest	$20,000
Total Expenses	$557,000
Net Income	$148,000

Balance Sheet – 12/30/2019

Assets:
Cash	$ 8,500
Equipment	$50,000
A/D – Equipment	(21,500)
Building	$250,000
A/D – Building	(100,000)
Total Assets	$187,000
Liabilities & Equity:
Mortgage – Building	$25,000
Member Capital – Avery	$81,000
Member Capital – Henry	$81,000
Total Liabilities & Equity	$187,000

Please provide Tucson LLC advice on the following transaction:

4. Detail for the fixed assets on the balance sheet above is as follows:

   Date Acquired	Description	Cost	Tax A/D
   4/1/2019	Furniture & Fixtures	$15,000	$8,000
   4/1/2019	Veterinary Equipment	$31,000	$12,500
   4/1/2019	Copier	$4,000	$1,000

Tucson LLC plans to sell all of these assets on 12/31/2019, the proceeds are as follows:

Furniture & Fixtures	$10,000
Veterinary Equipment	$35,000
Copier	$2,000

Calculate the amount and character of the gain or loss on the sale of these assets.

NOTE: Here, we must characterize and appropriately net any gains or losses. We would be left with a net section 1231 gain.

Answer 1

When the sale of section 1231 Property results in a gain, the gain is taxed at the lower of capital gain tax rate instead of the ordinary income tax rate.

Accroding to Internal revenue section code 1231, a section 1231 Property must meet all of the three following criteria.

1. Has been held atlease one year.

2. Is used for trade or business

3. Is either Depressible or real Property.

In the above case , the date of acquistion is 04-01-2019 and date fo sale is 31-12-2019, resulting in total number of days is 361 Days, which is considering as a year for calculation Purpose.

Calcualtion of Depreciation Per day will be as follows:-

Date of Acquistion	A/D date	No.of Days	AD amount	Dep Per day
04-01-2019	30-12-2019	360	8000	22.22
04-01-2019	30-12-2019	360	12500	34.72
04-01-2019	30-12-2019	360	1000	2.78

Calcualtion of net gain/ loss on the sale of property:-

Asset Amount	AD Amount	Net Block	Proceed from Sale	Net gain/loss
15000	8,022.22	6,977.78	10000	3,022.22
31000	12,534.72	18,465.28	35000	16,534.72
4000	1,002.78	2,997.22	2000	-997.22
Net Gain	18,559.72