Indivdual Taxation

WAR (We Are Rich) has been in business since 1986. 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 WARMr. Someday Woods (single). However, in early 2019, 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 2019 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 2014-2018 numbers do not reflect capital loss carryovers.

2014 2015 2016 2017 2018

Ordinary taxable income $ 4,000 $ 2,000 $ 94,000 $ 170,000 $ 250,000

Other items not included in ordinary taxable income:

Net gain (loss) on disposition of 1231 assets $ 3,000 10,000 $ (6,000 )

Net long-term capital gain (loss) $ (15,000 ) $ 1,000 $ (7,000 ) $ (7,000 )

on disposition of capital assets

In 2019, Mr. Woods had taxable income in the amount of $480,000 before considering the following events and transactions that transpired in 2019:

1. On January 1, 2019, 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, 2019, for $40,000.
2. On August 17, 2019, 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, 2015. At the time of sale, "Iron Byron" had an adjusted tax basis of $4,000. WAR sold "Iron Byron" for $25,000.
3. In the months October through December 2019, WAR sold various assets to come up with the funds necessary to invest in WAR's latest and greatest inventionthe three-dimple golf ball. Data on these assets are provided below:

Asset Placed in Service (or purchased) Sold Initial Basis Accumulated Depreciation Selling Price Someday's black leather sofa

(used in office) 4/4/18 10/16/19 $ 3,000 $ 540 $ 2,900 Someday's office chair 3/1/17 11/8/19 8,000 3,000 4,000 Marketable securities 2/1/16 12/1/19 12,000 0 20,000 Land held for investment 7/1/18 11/29/19 45,000 0 48,000 Other investment property 11/30/17 10/15/19 10,000 0 8,000

d. Finally, on May 7, 2019, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR purchased the building on January 5, 2007, 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.)

1. Compute Mr. Woods's taxable income after taking into account the transactions described above.
2. Compute Mr. Woods's tax liability for the year. (Ignore any net investment income tax for the year and assume the 20 percent qualified business income deduction is included in taxable income before these transactions.) Use Tax rate schedules
3. Complete Mr. Woods's Form 8949, 1040 Schedule D and Form 4797 (use the most current version of these schedules) to be attached to his Form 1040. Assume that asset bases are not reported to the IRS.

Mr. Woods's social security number: 412-34-5670

[The following information applies to the questions displayed below] WAR (We Are Rich) has been in business since 1986. 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 2019, Jack Hack and Someday Woods played a round of golf and Jack, for the first time ever, actually beat Mr. Woods. Mt. Woods was so upset that he fired Hack & Hack and has hired you to compute his 2019 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 2014-2018 numbers do not reflect capital loss carryovers. 2014 2815 Ordinary taxable income Other items not included in ordinary taxable 2816 2817 $ 2,eee $94, eee $170,eee $25e,eee 2818 $ 4,eee income: Net gain (loss) on disposition of 51231 assets Net long-term capital gain (loss) on disposition of capital assets $ 3,00e 10,eee $ (6,000) $(15,ee0) 1,eee $(7,eee) (7,eee) In 2019, Mr. Woods had taxable income in the amount of $480,000 before considering the following events and transactions that transpired in 2019 a. On January 1, 2019, 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, 2019, for $40,000. b. On August 17, 2019. WAR sold its golf testing machine, "Iron Byron" and replaced it with a new machine "Iron Tiger nnn 31 Prev of 3 Next 1 2 S b. On August 17, 2019, 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, 2015. 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 2019, WAR sold varlous 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 purchased) Selling Price Initial Accumulated Asset Sold Basis Depreciation Someday's black leather sofa (used in office) Someday's office chair Marketable securities Land held for investment Other investment $ 2,908 $ 3,eee $ 540 4/4/18 1e/16/19 4,000 3/1/17 8,eee 3,e00 11/8/19 20,eee 12/1/19 12,eee 2/1/16 48,86 7/1/18 11/29/19 45,eee ces 8,eee e 10/15/19 10,eee 11/30/17 property d. Finally, on May 7, 2019, WAR decided to sell the building where it tested its plutonlum shaft, lignite head drivers. WAR purchased the building on January 5, 2007, 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.) Compute Mr. Woods's taxable income afftertaking into account the transactions described above. Next of 3 2 3 Prev 1 O Compute Mr. Woods's taxable income after taking into account the transactions described above. 3 Depreciation Recapture Description Gain/(Loss) Ordinary incomel(Loss) Short Term Long Term Total 51231 LT LT 28% LT 25 % 0/15/20 % a Land bi Iron Byron c1 Sofa c2 Chair c3 Marketable secuntios c4 Land-for investment es Investment property c5 Building d1 d2 Land 0 01 0 0 0 0 0 0 S1231 netting Step1 depreciation recapture ordinary income Step 2- $1231 G/L netting gains/losses exclusive of 51250 Unirecap $1250 Step 3 lookback rule apply to unrecap $1250 first Next > of 3 1 2 3 Prev O The fair market value of the land at the time of sale was $45,000. (Do not round intermediete computstions. Round your final answers to the nearest whole dollar amount. Loss amounts should be indicated by a minus sign.) Complete Mr. Woods's Form 8949, 1040 Schedule D and Form 4797 (use the most current version of these schedules) to be attached to his Form 1040. Assume that asset bases are not reported to the IRS Mr. Woods's social security number: 412-34-5670 (Input all values as positive numbers unless instructed otherwise an the forms. Use 2019 tax rules regardless of year on tax form.) Form 8949 Form 8949 PG2 Form 4797 Form 4797 Schedule D PGI PG1 PG2 Form 8949 Sales and Other Dispositions of Capital Assets OMB No 1565-0074 2018 Department of the Treasury-Intemal Revenue Go to www.irs govFome49 for instractions and the latest indomation File with your Schedule D to ist your transactions for ines 1b, 2,3,8, 9 and 10 ot Schedude D. Service Atachment Sequence No 12A) Names) shown on returm Socal secuity number or txpayer denencation number Before you check Box A, 8, or C below, see whether you receved any Foms) 1099-48 or substitute statements trom your broker A substnute statement wa have the same intomation as Form 1099-8 Emer wil show whether your basis (usuaty your cost) was reported to the RS by your Droker and may even te you which box to cheok Transactions ivolving captal assets you held1 year or less are generally short dem (see imructons) For long lerm basactions, see page 2 Part I Short-Term. You may aggregate all shortterm transactions reported on Formes) 10998 showing bass was reported to the IRS and for which no adustments Note: or codes are required Erter the totals directly on Schedule D, ne 1a you aren't required to report these transactions on Fom 8943 see nuctions) If more than one box apples for your short-tem transactions, compte a sepaate Form 8949, page 1, You must check Box A, B, or C below. Check only one box on this page for one or more of the boxes complete an many toms with he same box for each applcable box If you have more short term trasactions tan wil checked as you need Next of 3 1 2 3 Prev O The fair market value of the land at the time of sale was $45,000. (Do not round intermediete computstions. Round your final answers to the nearest whole dollar amount. Loss amounts should be indicated by a minus sign.) Complete Mr. Woods's Form 8949, 1040 Schedule D and Form 4797 (use the most current version of these schedules) to be attached to his Form 1040. Assume that asset bases are not reported to the IRS Mr. Woods's social security number: 412-34-5670 (Input all values as positive numbers unless instructed otherwise an the forms. Use 2019 tax rules regardless of year on tax form.) Form 8949 Form 8949 PG2 Form 4797 Form 4797 Schedule D PGI PG1 PG2 Form 8949 Sales and Other Dispositions of Capital Assets OMB No 1565-0074 2018 Department of the Treasury-Intemal Revenue Go to www.irs govFome49 for instractions and the latest indomation File with your Schedule D to ist your transactions for ines 1b, 2,3,8, 9 and 10 ot Schedude D. Service Atachment Sequence No 12A) Names) shown on returm Socal secuity number or txpayer denencation number Before you check Box A, 8, or C below, see whether you receved any Foms) 1099-48 or substitute statements trom your broker A substnute statement wa have the same intomation as Form 1099-8 Emer wil show whether your basis (usuaty your cost) was reported to the RS by your Droker and may even te you which box to cheok Transactions ivolving captal assets you held1 year or less are generally short dem (see imructons) For long lerm basactions, see page 2 Part I Short-Term. You may aggregate all shortterm transactions reported on Formes) 10998 showing bass was reported to the IRS and for which no adustments Note: or codes are required Erter the totals directly on Schedule D, ne 1a you aren't required to report these transactions on Fom 8943 see nuctions) If more than one box apples for your short-tem transactions, compte a sepaate Form 8949, page 1, You must check Box A, B, or C below. Check only one box on this page for one or more of the boxes complete an many toms with he same box for each applcable box If you have more short term trasactions tan wil checked as you need Next