Darryl is the sole proprietor of a motorcycle shop. During the present year, Darryl had $32,000 of adjusted gross income before considering the tax effect of the following transactions. Darryl has no remaining nonrecaptured 1231 losses from the prior five tax years.

a. Land adjacent to the store was purchased 3-years ago for an anticipated store expansion. It cost $14,000 and was sold this year for $35,000.

b. Obsolete 5-year-old motorcycle repair equipment was sold for $12,000 during the year. It was fully depreciated. The equipment cost $65,000.

c. Darryl developed and patented a new synthetic oil called Super Z. Darryl had not reduced the patent to practice. He sold all his rights in the patent for $75,000 to Harley Davidson. Darryl had not amortized the $12,000 cost of obtaining the patent. He held the patent for more than a year, but less than five years.

d. A 3-year-old delivery truck with an adjusted basis of $6,000 was sold for $17,000. It had cost $10,000.

e. One of the motorcycle repair machines caught on fire and was completely destroyed. It had an adjusted basis of $17,000. The insurance recovery was $24,000. The machine was obsolete, had been purchased several years ago, and was not replaced.

f. Darryl bought an electronic cash register for $3,000 early in the year. It was not suitable for his business. Darryl sold it for $2,500 four months after it was purchased.

g. Darryls 2-year-old personal car was rear-ended by a truck. The auto was completely demolished. The adjusted basis of the car was $15,000. Darryl did not have any insurance for collision damage. The car was worth $12,000 before the crash.

h. Darryl sold for $300,000 an apartment building he had owned for 15 years. Total depreciation on the building was $363,189. The adjusted basis was $125,000.

i. Darryl sold Memorial Grady stock (purchased in January of last year for $16,000) for $39,000 in December of this year.

j. Darryl sold Del Amo Foods stock (purchased in September of this year for $27,000) for $21,000 in December of this year.

Using the Worksheet provided:

1. Analyze each transaction above to determine the amount of gain or loss from that transaction. Identify such amount in Column 1.

2. Determine the initial classification(s) of each gain and loss (Exhibits 6 and 7 can assist) and place the gains/losses in the correct columns (Columns 3-11) on the Worksheet.

4. After completing the Worksheet, determine Darryls AGI and deductions from AGI.

fx Amount of G/L Personal Use Deduction for AGI Dedcution from Depreciation Gains Casualty & Theft Other Casualty & Transaction & Recature Theft $1231 Netting Process Ordinary Income AGI 3 Land 5 Patent 8 Truck 7 Machine a Register 9 Car 10 Buildin 11 DAF Stock 12 MG Stock 13 SUBTOTAL 14 Distribute Amount 15 Distribute Amount Distribute Amount n/a TOTAL Ordinary income If net gain, due to recapture. distribute all Distribute to Col. 9. long-term items 6. If net loss, nonrecaptured net If net gain, distribute to Col. Col. 9 to extent of any If net gain, distribute to Net Net Total Ol Total deductionPersonal use for AGI to Col. 7 and al distribute gains 51231 loss from the 5 short-term items to Col. 9 and to Col. 8. If net losses to Col.10. Distribute remaining gain loss, distribute to Col. 11. property total casualty & theft loss deductible to extent exceeds 10% of AGI. prior tax years. (if any) to Col. 7. If net loss, distrbute gains to Col. 9 and losses to Col. 10, 18 fx Amount of G/L Personal Use Deduction for AGI Dedcution from Depreciation Gains Casualty & Theft Other Casualty & Transaction & Recature Theft $1231 Netting Process Ordinary Income AGI 3 Land 5 Patent 8 Truck 7 Machine a Register 9 Car 10 Buildin 11 DAF Stock 12 MG Stock 13 SUBTOTAL 14 Distribute Amount 15 Distribute Amount Distribute Amount n/a TOTAL Ordinary income If net gain, due to recapture. distribute all Distribute to Col. 9. long-term items 6. If net loss, nonrecaptured net If net gain, distribute to Col. Col. 9 to extent of any If net gain, distribute to Net Net Total Ol Total deductionPersonal use for AGI to Col. 7 and al distribute gains 51231 loss from the 5 short-term items to Col. 9 and to Col. 8. If net losses to Col.10. Distribute remaining gain loss, distribute to Col. 11. property total casualty & theft loss deductible to extent exceeds 10% of AGI. prior tax years. (if any) to Col. 7. If net loss, distrbute gains to Col. 9 and losses to Col. 10, 18