Problem 3

Ottley LLC manufactures and sells kitchen cabinets. It wants to improve its operational efficiency and has transacted several dealings this year for that purpose.Consider each of the following transactions and respond accordingly.

1. Analyze each of the following transactions for gain or loss and determine whether the gain or loss is 1231, capital or ordinary.
2. Sold a lathe for $30,000 that it purchased two years ago for $16, 200 and on which it had taken $5,000 of depreciation.
3. Holds 1,000 shares of stock in Viya which had a value of $15,000 at the beginning of the year and at the end of the year, $20,000.
4. Sold kitchen cabinets with a cost basis of $10,000 for $18,000
5. Disposed of a warehouse with a fair market value of $80,000 for another warehouse with a fair market value of $60,000 and $20,000 in cash. The warehouse was bought five years ago for $67,000 and $18,000 of depreciation was taken on it.
6. Land held for investment was sold for $35,000.It was originally bought three years ago for $28,000
7. Sold another lathe for a note payable in five annual installments of $8,000.The first payment was received in 2018.The machine was bought three years ago for $20,000 and $ 8,000 of depreciation was taken
8. Sold an electric table saw for $4,200 which was purchased six months ago for $6,000 and on which $450 0f depreciation was claimed
9. From the gains and losses recognized in part A determine the net 1231 gain or loss and the net ordinary gain or loss Amor will recognize on its tax return.The company had $1,500 of non-recaptured net 1231 losses from previous years.