Compute Mr. Woods Taxable income AFTER taking in to account the transactions described above.

WAR (We Are Rich) has been in business since 1985. 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 2018, Jack Hack and Someday Woods played a round of golf and Jack, for the first time ever, actually beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired you to compute his 2018 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. Wood'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 2013-2017 numbers do not reflect capital loss carryovers. 2013 2014 2015 2016 2017 Ordinary taxable income Other items not included in ordinary taxable income: 4,000 $ 2,000 $94,000 $170,000 $250,000 (6,000) Net gain (loss) on disposition of 1231 assets Net long-term capital gain (loss) 3,000 10,000 (7,000) disposition of capital $(15,000) 1,000 $(7,000) assets on In 2018, Mr. Woods had taxable income in the amount of $480,000 before considering the following events and transactions that transpired in 2018: a. On January 1, 2018, WAR purchased a plot of land for $100,000 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, 2018, for $40,000 b. On August 17, 2018, 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 $22,000 on February 5, 2014. At the time of sale, "Iron Byron" had an adjusted tax basis of $4,000. WAR sold "Iron Byron" for $25,000. c. In the months October through December 2018, 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: Placed in Service (or Initial Accumulated Selling Price purchased) Sold Basis Depreciation Asset Someday's black leather sofa (used in office) Someday's office chair Marketable securities $ 3,000 8,000 12,000 45,000 10,000 4/4/17 3/1/16 2/1/15 7/1/17 11/30/16 10/16/18 11/8/18 12/1/18 11/29/18 10/15/18 540 2,900 $ 4,000 $3,000 20,000 48,000 $ 8,000 Land held for investment Other investment property d. Finally, on May 7, 2018, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR purchased the building on January 5, 2006, for $190,000 ($170,000 for the building. $20,000 for the land). At the time of the sale, the accumulated depreciation on the building was $50,000. WAR sold the building (with the land) for $300,000. The fair market value of the land at the time of sale was $45,000. (Do not round intermediate computations. Round your final answers to the nearest whole dollar amount. Loss amounts should be indicated by a minus sign.) Gain/(Loss) Depreciation Recapture Ordinary income/(Loss) Short Long Term Total LT LT 28% Description $1231 LT 25% Term 0/15/20% Land Iron Byron c1 Sofa c2 Chair c3 Marketable securities Land for investment c4 Investment property c5 Building d1 d2 Land 0 0 C C S1231 netting Step1 depreciation recapture ordinary income Step 2 1231 G/L netting gains/losses exclusive of $1250 Unrecap 1250 Step 3 lookback rule apply to unrecap $1250 first Ordinary income Remaining unrecap $1250 Remaining gain - 0/15/20 0 0 0 0 0 0 0 0 Capital gain netting Step 1 Step 2 Step 3 Step 4 Subtotal Step 5 Step 6 Step 7 Subtotal Step 8 Step Total C C S 0 Taxable Income: Before transactions 480,000 Ordinary income LTCG@ 25% LTCG @ 0/15/20 % S 480,000 Taxable income WAR (We Are Rich) has been in business since 1985. 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 2018, Jack Hack and Someday Woods played a round of golf and Jack, for the first time ever, actually beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired you to compute his 2018 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. Wood'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 2013-2017 numbers do not reflect capital loss carryovers. 2013 2014 2015 2016 2017 Ordinary taxable income Other items not included in ordinary taxable income: 4,000 $ 2,000 $94,000 $170,000 $250,000 (6,000) Net gain (loss) on disposition of 1231 assets Net long-term capital gain (loss) 3,000 10,000 (7,000) disposition of capital $(15,000) 1,000 $(7,000) assets on In 2018, Mr. Woods had taxable income in the amount of $480,000 before considering the following events and transactions that transpired in 2018: a. On January 1, 2018, WAR purchased a plot of land for $100,000 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, 2018, for $40,000 b. On August 17, 2018, 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 $22,000 on February 5, 2014. At the time of sale, "Iron Byron" had an adjusted tax basis of $4,000. WAR sold "Iron Byron" for $25,000. c. In the months October through December 2018, 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: Placed in Service (or Initial Accumulated Selling Price purchased) Sold Basis Depreciation Asset Someday's black leather sofa (used in office) Someday's office chair Marketable securities $ 3,000 8,000 12,000 45,000 10,000 4/4/17 3/1/16 2/1/15 7/1/17 11/30/16 10/16/18 11/8/18 12/1/18 11/29/18 10/15/18 540 2,900 $ 4,000 $3,000 20,000 48,000 $ 8,000 Land held for investment Other investment property d. Finally, on May 7, 2018, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR purchased the building on January 5, 2006, for $190,000 ($170,000 for the building. $20,000 for the land). At the time of the sale, the accumulated depreciation on the building was $50,000. WAR sold the building (with the land) for $300,000. The fair market value of the land at the time of sale was $45,000. (Do not round intermediate computations. Round your final answers to the nearest whole dollar amount. Loss amounts should be indicated by a minus sign.) Gain/(Loss) Depreciation Recapture Ordinary income/(Loss) Short Long Term Total LT LT 28% Description $1231 LT 25% Term 0/15/20% Land Iron Byron c1 Sofa c2 Chair c3 Marketable securities Land for investment c4 Investment property c5 Building d1 d2 Land 0 0 C C S1231 netting Step1 depreciation recapture ordinary income Step 2 1231 G/L netting gains/losses exclusive of $1250 Unrecap 1250 Step 3 lookback rule apply to unrecap $1250 first Ordinary income Remaining unrecap $1250 Remaining gain - 0/15/20 0 0 0 0 0 0 0 0 Capital gain netting Step 1 Step 2 Step 3 Step 4 Subtotal Step 5 Step 6 Step 7 Subtotal Step 8 Step Total C C S 0 Taxable Income: Before transactions 480,000 Ordinary income LTCG@ 25% LTCG @ 0/15/20 % S 480,000 Taxable income