60. LO.8 Wes acquired a mineral interest during the year for $10 million. A geological survey estimated that 250,000 tons of the mineral remained in the deposit. During the year, 80,000 tons were mined, and 45,000 tons were sold for $12 million. Other expenses Salary for equipment operators $ 42,000 Payroll taxes 7,000 Fuel and oil for the equipment 21,000 Purchase of three new front-end loaders on January 15, 2013, for $550,000. John made the election under § 179. 550,000 Purchase of a new dump truck on January 18, 2013 80,000 During 2013, John had the following additional items:
Interest income from First National Bank $10,000 Dividends from ExxonMobil 9,500 Quarterly estimated tax payments 11,500 John does take additional first-year depreciation.
On October 8, 2013, John inherited IBM stock from his Aunt Mildred. John had been her favorite nephew. According to the data provided by the executor of Aunt Mildred’s estate, the stock was valued for estate tax purposes at $110,000. John is considering selling the IBM stock for $125,000 on December 29, 2013, and using $75,000 of the proceeds to purchase an Acura ZDX. He would use the car 100% for business. John wants to know what effect these transactions would have on his 2013 adjusted gross income.
Write a letter to John in which you present your calculations. Also prepare a memo for the tax files.