Problem 40 (realized gains and losses, recognized gains and losses, adjusted basis, tax planning for asset purchases)

LO.1, 2, 3 Rod Clooney purchases Kayla Mitchells sole proprietorship for $990,000 on August 15, 2021. The assets of the business are:

Asset	Sian's Adjusted Basis	FMV
Accounts receivable	$70,000	$70,000
Inventory	90,000	100,000
Equipment	150,000	160,000
Furniture and fixtures	95,000	130,000
Building	190,000	250,000
Land	25,000	75,000
Total:	620,000	785,000

a. Calculate Kaylas realized and recognized gain.

b. Determine Rods basis for each of the assets.

c. Write a letter to Rod informing him of the income tax consequences of the purchase. His address is 300 Riverview Drive, Delaware, OH 43015.