I:13-46 Purpose of Sec. 1245. Martin owns equipment used in his trade or business purchased four years ago for $200,000. Martin sells the equipment in the current year for $110,000 when its adjusted basis is $52,000. No other sales or exchanges are made this year or the preceding five years. His tax rate is 35% and 15% for ANCG for all years since the year of purchase.

a. Determine the increase in Martin’s AGI for the current year as a result of the sale if Sec.

1245 did not exist.

b. Determine the increase in Martin’s AGI for the current year as a result of the sale if Sec.

1245 does exist.

c. Given that Sec. 1245 does exist, how much higher is his tax in

(b) than in (a)?