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.

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

5 6 10 Personal Use Casualty & Theft Amount of G/L from Transaction | Depreciation Gains & | Recature | Other Casualty & Theft G/L 51231 Netting Dedcution from AGI Item G/L LTC G/L STC G/L Ordinary IncomeDeduction for AGI Equipment Truck Machine Register Buildi DAF Stock MG Stock SUBTOTAL Distribute Amount Distribute Amount Distribute Amount TOTAL n/a n/a Ordinary income due If net gain, to recapture. Distribute to Col. 9. term items to Col.. If net loss, If net gain, If net gain, Net LTC Net STC Total O Total deduction for Personal use distribute all long- distribute to Col. 6 distribute to Col. 9 AGI property total asualty&theft loss deductible to extent exceeds 10% of AGI. to extent of any 7 and all short distribute gains to nonrecaptured net term items to Co. Col. 9 and losses to 51231 loss from 8. If net loss,Col. 10. distribute to Col. the 5 prior tax years. Distribute remaining gain (If any) to Col. 7. If net loss, distrbute eains to Col.9 and losses to Col. 10. Each amount in Col. 1 must be allocated to Columns 3-11 depending on initial classification of G/L 1.. Remember, personal use casualty and theft losses are subject to a floor 5 6 10 Personal Use Casualty & Theft Amount of G/L from Transaction | Depreciation Gains & | Recature | Other Casualty & Theft G/L 51231 Netting Dedcution from AGI Item G/L LTC G/L STC G/L Ordinary IncomeDeduction for AGI Equipment Truck Machine Register Buildi DAF Stock MG Stock SUBTOTAL Distribute Amount Distribute Amount Distribute Amount TOTAL n/a n/a Ordinary income due If net gain, to recapture. Distribute to Col. 9. term items to Col.. If net loss, If net gain, If net gain, Net LTC Net STC Total O Total deduction for Personal use distribute all long- distribute to Col. 6 distribute to Col. 9 AGI property total asualty&theft loss deductible to extent exceeds 10% of AGI. to extent of any 7 and all short distribute gains to nonrecaptured net term items to Co. Col. 9 and losses to 51231 loss from 8. If net loss,Col. 10. distribute to Col. the 5 prior tax years. Distribute remaining gain (If any) to Col. 7. If net loss, distrbute eains to Col.9 and losses to Col. 10. Each amount in Col. 1 must be allocated to Columns 3-11 depending on initial classification of G/L 1.. Remember, personal use casualty and theft losses are subject to a floor