Mark operates a small proprietorship called Custom Silk that prints customized silk screen t-shirts. He operates the business on a calendar year basis. In December of 2019, Mark has two Sec. 1231 assets that he would like to sell. One is a small delivery truck he uses for dropping off orders to customers, which he expects will generate a Sec. 1231 loss of $10,000. The other is a special silk screen press machine that he expects will produce a remaining $10,000 Sec. 1231 gain (after $5,000 of the total gain on the sale of the machine is reclassified as ordinary income because of depreciation recapture). You as Mark's tax accountant have advised him that he should think about whether he can save taxes by considering different timing for the sale of each asset across his 2019 and 2020 tax years.

Information to use in assessing the asset sale timing decision to maximize tax savings:

1. For capital gains tax rate purposes, assume Mark is not a high income taxpayer.
3. Assume Mark's has a flat 20% tax rate on ordinary income in both 2019 and 2020.
5. Assume that Mark has $10,000 of ordinary taxable income from his regular business
6. operations in each year (2019 and 2020) before considering any gain or loss
7. consequences from the disposition of the Sec. 1231 assets.
8. Assume that both Sec. 1231 assets were fully depreciated several years past. Thus, there
9. is no additional depreciation deduction to be taken for either of the disposal assets in
10. 2019 or 2020.
11. Mark has had no other Sec. 1231 gains or losses in the past 10 years, and he does not
12. expect to have any other sales of Sec. 1231 assets in the next 10 years.
13. Assume that the time value of money does not matter. In other words, assume that a dollar of tax savings received in 2020 is worth the same as if it had been received in
14. 2019.

What timing of the sales for the Sec. 1231 gain and loss assets would produce the lowest tax burden in total (in sum) across 2019 and 2020?

I. Sell both Sec. 1231 assets in 2019.

II. Sell both Sec. 1231 assets in 2020.

III. Sell the Sec. 1231 gain asset in 2019 and the Sec. 1231 loss asset in 2020.

IV. Sell the Sec. 1231 loss asset in 2019 and the Sec. 1231 gain asset in 2020.

V. None of the above.The ordering does not matter and each of the situations above will result in the same total (summed)tax burden across 2019 and 2020