Comprehensive Problem 11-73 (LO 11-1, LO 11-2, LO 11-3, LO 11-4, LO 11-5, LO 11-6) (Algo) [The following information applies to the questions displayed below.] WAR (We Are Rich) has been in business since 1989. WAR is an accrual-method sole proprietorship that deals in the manufacturing and wholesaling of various types of golf equipment. Hack & Hack CPAs has filed accurate tax returns for WAR's owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with the owner of WAR-Mr. Someday Woods (single). However, in early 2022, Jack Hack and Someday Woods played a round of golf, and Jack, for the first time ever, beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired you to compute his 2022 taxable income. Mr. Woods was able to provide you with the following information from prior tax returns. The taxable income numbers reflect the results from all of Mr. Woods's activities except for the items separately stated. You will need to consider how to handle the separately stated items for tax purposes. Also, note that the 2017- 2021 numbers do not reflect capital loss carryovers. Ordinary taxable income Other items not included in 2021 2017 $ 4,280 2018. $ 2,140 2019 2020 $ 97,290 $ 175,950 $ 258,750 ordinary taxable income: Net gain (loss) on disposition of 51231 assets $ 3,420 10,700 $ (6,848) Net long-term capital gain (loss) on disposition of capital assets $ (16,050) $ 1,140 $ (16,300) $ (8,400) In 2022, Mr. Woods had taxable income in the amount of $508,000 before considering the following events and transactions that transpired in 2022: a. On January 1, 2022, WAR purchased a plot of land for $107,000 with the intention of creating a driving range where patrons could test their new golf equipment. WAR never got around to building the driving range; instead, WAR sold the land on October 1, 2022, for $42,800. b. On August 17, 2022, WAR sold its golf testing machine. "Iron Byron," and replaced it with a new machine, "Iron Tiger." "Iron Byron was purchased and installed for a total cost of $24,800 on February 5, 2018. At the time of sale, "Iron Byron had an adjusted tax basis of $6,800. WAR sold "Iron Byron" for $32,000. c. In the months October through December 2022, WAR sold various assets to come up with the funds necessary to invest in WAR's latest and greatest invention-the three-dimple golf ball. Data on these assets are provided below. b. On August 17, 2022, WAR sold its golf testing machine, "Iron Byron," and replaced it with a new machine, "Iron Tiger." "Iron Byron" was purchased and installed for a total cost of $24,800 on February 5, 2018. At the time of sale. "Iron Byron" had an adjusted tax basis of $6,800. WAR sold "Iron Byron" for $32,000. c. In the months October through December 2022, WAR sold various assets to come up with the funds necessary to invest in WAR's latest and greatest invention-the three-dimple golf ball. Data on these assets are provided below. Asset Someday's black leather sofa (used in office) Someday's office chair Placed in Service (or purchased) Sold Initial Basis Accumulated Selling Depreciation Price 4/4/21 10/16/22 $ 3,560 3/1/20 11/8/22 9,120 $680 3,280 $3,320 4,700 Marketable securities 2/1/19 12/1/22 13,688 e 21,400 Land held for investment Other investment 7/1/21 11/29/22 52,000 54,380 property 11/30/20 10/15/22 17,000 13,680 d. Finally, on May 7, 2022, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR purchased the building on January 5, 2010, for $225,000 ($198,000 for the building, $27,000 for the land). At the time of the sale, the accumulated depreciation on the building was $57,000. WAR sold the building (with the land) for $342,000. The fair market value of the land at the time of sale was $52,000. Note: Do not round Intermediate computations. Round your final answers to the nearest whole dollar amount. Loss amounts should be Indicated by a minus sign. Required information Description Gain or Depreciation Ordinary Short $1231 income or (Loss) Recapture Term (Loss) Long Term Long term Long term Total 28% 25% Long term 0/15/20% a. Land (64,200) (64,200) 0 $ 0 $ 0 0 0 b. Iron Byron c1. Sofa 25,200 18,000 7,200 0 0 0 440 440 0 0 0 0 0 0 c2. Chair (1.140) 0 (1.140) 0 0 0 0 0 0 c3. Marketable securities 7,720 0 7,720 0 0 7,720 c4. Land- for investment 2,300 0 0 0 0 2,300 0 2,300 c5. Investment property (3,400) 0 0 O (3,400) 0 0 (3,400) d1. Building 140,000 0 0 0 0 0 0 d2. Land 25.000 25,000 0 0 0 0 O 140,920 18,440 31,000 (64.200) 0.620 0 0,020 $1231 netting Step1-depreciation recapture - ordinary income Step 2-$1231 Gain or Loss netting -gains or losses exclusive of $1250 -Unrecapture $1250 Step 3-lockback rule -apply to unrecapture $1250 first Ordinary income Remaining unrecapture $1250 Remaining gain-0/15/20 Capital gain netting Long term capital loss carryover 18.440 31.000 (64,200) 0 0.820 D 6.620 D 722 Mart Taxable Income: Before transactions Ordinary income/loss LTCG @ 25% LTCG @ 0/15/20% Taxable income 69 0