Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Nine months ago you paid $160,000 for a tract of timber that you are using as an investment. At time of purchase the tract
Nine months ago you paid $160,000 for a tract of timber that you are using as an investment. At time of purchase the tract contained a total of 450 MBF of sawtimber. An appraisal at the time of purchase indicated the tract was worth $180,000 in total with $151,200 of that value in the sawtimber, $27,000 of that value being the bare land, and the remaining $1,800 being the value of an old business truck also on the site. You just sold a total of 100 MBF of timber from this property, which was harvested as part of a Timber Stand Improvement activity, and received a stumpage price of $320 per MBF sold. If the federal long term capital gains tax rate is 15%, the federal short term capital gains tax rate is 25% and the federal ordinary income tax rate is 28%, what will be the amount of federal tax you now owe on the timber that was just harvested?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started