Long-Ball Inc. (an accrual basis corporation) reported the following for its 2022 tax year ending December 31, 2022 (a full twelve month year).  Long-Ball is in the business of manufacturing golf clubs, specifically drivers and irons that fly farther and straighter than most other brands.  All manufacturing equipment is leased by the corporation.  The following information should be used to calculate Long-Ball's taxable income for 2022.

 Operating net income before the following property transactions and cost recovery deductions                                                                  $1,240,000

 Other information:

•   2022 charitable contribution                           $92,000

•   Short-term capital loss carryforward 2015     $250,000

•   Short-term capital loss carryforward 2019     $225,000

•   Charitable deduction carryforward 2018        $12,000

•   Net operating loss carryforward 2021            $15,000

•   Unrecaptured §1231 losses from the 5 prior years     $65,000

 Calculate Taxable Income, Taxable Income for the charitable contribution limit, and the charitable contribution limitation.

 Are there any limits as to the amount of the net operating loss that may be used in 2022? What is the IRC citation for any limits?

 Calculate the gain/loss realized and recognized for the following property transactions and the cost recovery deductions.

Calculate the net Section 1231 gain or loss

 Calculate the net long-term or short-term capital gain or loss

 What is the IRC section that discusses the carryforward and carryback of corporate net capital losses?

a.   On June 8, 2022, Long-Ball Inc. sold a small warehouse that had been used to store items before shipment.  The warehouse was sold for $850,000 (building $775,000 and land $75,000).  The warehouse was purchased on March 10, 2013, for $450,000 ($400,000 building and $50,000 land). You will need to calculate the accumulated depreciation as of the sales date on June 8th    which will include the current year's depreciation that will need to be deducted in calculating taxable income.

b.  On July 18, 2022, Long-Ball sold equipment that was used in the selling activities of the business for $175,000 cash.  The selling equipment was placed into service on February 8, 2017, and cost $145,000 (7-year property and was used property at the time of its purchase from a corporation that was in bankruptcy). The office equipment was new property at the time of the purchase. All of the property was placed into service on the date of purchase and is 7-year class property. 

Used selling equipment             $155,000                  February 8, 2017  

New office equipment             $2,650,000                April 17, 2017

 

Long-Ball used the cost recovery method that would result in the largest deduction when the above property was placed into service in 2017. 

i)          Calculate the accumulated depreciation and the current year's depreciation deduction for the above two assets.

i.   How much §179 expensing election is available for 2017?

a.   Support answer with Internal Revenue Code (IRC) citation and the Revenue Procedure that modifies any of the limits found in the IRC.

ii.   How much §168(k) bonus depreciation is available for 2017?

a.   What property qualifies and what are the limits including proper IRC citations?

ii)        Calculate the gain or loss from the sale of the used selling equipment and the character of the gain or loss.

 c.   On July 25, 2022, Long-Ball sold 25 acres of land that it was holding as an investment. The land was purchased on January 10, 2012, for $1,375,000.  Long-Ball sold the land for $1,625,000 and received cash of $95,000, a note receivable of $955,000 (adequate interest rate with the interest income for 2022 included in the operating net income at the beginning of the problem) and the buyer took the property subject to a mortgage of $575,000.  Long-Ball would like to recognize the least amount of gain possible for the 2022 tax year.  Calculate the realized gain, recognized gain, and the character of the gain.  What IRC section is used to recognize the least amount of gain?