Jada is a single taxpayer who expects to have a marginal tax rate of 35% and a (capital gain) rate of 15% for 2020 and 2021.

In May of 2020, Jada sold stock in XYZ Corporation for $29,400. The stock had been purchased in November of 2019 for $41,800. In the last several weeks of 2020, Jada has identified a new investment opportunity in which she would like to invest. She needs $40,000 for the investment, but she does not have the cash available currently. As a result, she is considering selling one of two assets to provide the cash she will need:

• Asset A: Machinery that is used in her business. Jada estimates that the machinery will sell for $42,000. She purchased the machinery in 2017 for $56,800. During the time that she has held the machinery, she has taken depreciation of $23,000.
• Asset B: Land that is used in her business. Jada estimates that the land would sell for $41,800. She purchased the land in 2018 for $29,000.

In addition to having flexibility over choosing which asset to sell, Jada also has flexibility over the timing of the sale. She can either choose to sell either asset before the close of the tax year or she could wait until the beginning of the following tax year. She just needs to have the cash for her new investment by the end of January of 2021.

Jada doesnt believe that her business will be substantially impacted by the sale of either asset. She believes that she will be able to identify a buyer for either asset rather easily. For purposes of this analysis, you may ignore any costs of effectuating the sale, and assume that any gain or loss on the sale will not impact the tax brackets detailed above.

KEY TASKS

• Analyze the pattern of facts in the scenario and perform the following calculations:
  • Gain/loss from the sale of Asset A
  • Gain/loss from sale of Asset B
  • Netting process for gains and losses
• Analyze the tax effects of the timing of gain/loss and the tax rate that applies for the netting process.
• Identify how changes in the transaction can impact the tax treatment.
• In developing your recommendation, analyze the possible alternatives related both to the sale of the two assets and the timing of the sale.

PLEASE ANSWER ALL THE QUESTIONS KEY TASK CORRECTLY, ALSO TELL ME WHICH ALTERNATIVE IS BETTER.