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Hart, an individual, bought an asset for $500,000 and has claimed $100,000 of depreciation deductions against the asset. Hart has a marginal tax rate of
Hart, an individual, bought an asset for $500,000 and has claimed $100,000 of depreciation deductions against the asset. Hart has a marginal tax rate of 32 percent.
Answer the questions presented in the following alternative scenarios (assume Hart had no property transactions other than those described in the problem):
- What is the amount and character of Harts recognized gain or loss if the asset is tangible personal property sold for $450,000?What effect does the sale have on Harts tax liability for the year?
- What is the amount and character of Harts recognized gain or loss if the asset is tangible personal property sold for $550,000?What effect does the sale have on Harts tax liability for the year?
- What is the amount and character of Harts recognized gain or loss if the asset is tangible personal property sold for $350,000?What effect does the sale have on Harts tax liability for the year?
- What is the amount and character of Harts recognized gain or loss if the asset is a non-residential building sold for $450,000?What effect does the sale have on Harts tax liability for the year?
- Now assume that Hart is a C corporation. What is the amount and character of its recognized gain or loss if the asset is a nonresidential building sold for $450,000? What effect does the sale have on Harts tax liability for the year (assume the same 21 percent marginal tax rate)?
- Assuming that the asset is real property, which entity type should be used to minimize the taxes paid on real estate gains?
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