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Comprehensive Problem 11-73 (LO 11-1, LO 11-2, LO 11-3, LO 11-4, LO 11-5, LO 11-6)

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WAR (We Are Rich) has been in business since 1987. WAR is an accrual-method sole proprietorship that deals in the manufacturing and wholesaling of various types of golf equipment. Hack & Hack CPAs has filed accurate tax returns for WARs owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with the owner of WARMr. Someday Woods (single). However, in early 2020, Jack Hack and Someday Woods played a round of golf, and Jack, for the first time ever, actually beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired you to compute his 2020 taxable income. Mr. Woods was able to provide you with the following information from prior tax returns. The taxable income numbers reflect the results from all of Mr. Woods's activities except for the items separately stated. You will need to consider how to handle the separately stated items for tax purposes. Also, note that the 20152019 numbers do not reflect capital loss carryovers.

	2015			2016		2017			2018			2019
Ordinary taxable income	$	4,000		$	2,000	$	94,000		$	170,000		$	250,000
Other items not included in ordinary taxable income:
Net gain (loss) on disposition of 1231 assets	$	3,000			10,000				$	(6,000	)
Net long-term capital gain (loss) on disposition of capital assets	$	(15,000	)	$	1,000	$	(7,000	)				$	(7,000	)

In 2020, Mr. Woods had taxable income in the amount of $480,000 before considering the following events and transactions that transpired in 2020:

1. a. On January 1, 2020, WAR purchased a plot of land for $100,000 with the intention of creating a driving range where patrons could test their new golf equipment. WAR never got around to building the driving range; instead, WAR sold the land on October 1, 2020, for $40,000.
3. b. On August 17, 2020, WAR sold its golf testing machine, Iron Byron, and replaced it with a new machine, Iron Tiger. Iron Byron was purchased and installed for a total cost of $22,000 on February 5, 2016. At the time of sale, Iron Byron had an adjusted tax basis of $4,000. WAR sold Iron Byron for $25,000.
5. c. In the months October through December 2020, WAR sold various assets to come up with the funds necessary to invest in WARs latest and greatest inventionthe three-dimple golf ball. Data on these assets are provided below:

Asset	Placed in Service (or purchased)	Sold	Initial Basis		Accumulated Depreciation		Selling Price
Somedays black leather sofa (used in office)	4/4/19	10/16/20	$	3,000	$	540	$	2,900
Somedays office chair	3/1/18	11/8/20		8,000		3,000		4,000
Marketable securities	2/1/17	12/1/20		12,000		0		20,000
Land held for investment	7/1/19	11/29/20		45,000		0		48,000
Other investment property	11/30/18	10/15/20		10,000		0		8,000

1. d. Finally, on May 7, 2020, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR purchased the building on January 5, 2008, for $190,000 ($170,000 for the building, $20,000 for the land). At the time of the sale, the accumulated depreciation on the building was $50,000. WAR sold the building (with the land) for $300,000. The fair market value of the land at the time of sale was $45,000. (Do not round intermediate computations. Round your final answers to the nearest whole dollar amount. Loss amounts should be indicated by a minus sign.)
2. 

Comprehensive Problem 11-73 Part 2 Compute Mr. Woods's tax liability for the year. (Ignore any net investment income tax for the year and assume the 20 percent qualified business income deduction is included in taxable income before these transactions.) Use Tax rate schedules Tax Liability: Tax on ordinary income Tax on 25% Gain $ 480,000 (35,560) 121,000 $ 565,440 Tax on 0/15/20% Gain (taxed at 20%) Total tax liability 4 See instructions for how to figure the amounts to enter on the lines below. (g) Adjustments to (d) Proceeds (sales (e) Cost (or other gain or loss from (h) Gain or loss). Subtract column (e) from price) basis) This form may be easier to complete if you round off cents to whole dollars. Form(s) 8949, Parti, column (d) and combine the result with column (g) line 2 column (g) 1a Totals for all short-term transactions reported on Form 1099-B for which basis was reported to the IRS and for which you have no adjustments (see instructions). However, if you choose to report all these transactions on Form 8949, leave this line blank and go to line 1b 0 1b Totals for all transactions reported on Form(s) 8949 with Box A checked 0 Totals for all transactions reported on Form(s) 8949 with Box B checked 0 ... Totals for all transactions reported on Form(s) 8949 with Box C checked 0 NAME 4 Short-term gain from Form 6252 and short-term gain or loss) from Forms 4684, 6781, and 8824 5 Net short-term gain or loss) from partnerships, S corporations, estates, and trusts from Schedule(s) K-1 5 6 Short-term capital loss carryover. Enter the amount, if any, from line 8 of your Capital Loss Carryover Worksheet in the instructions 6 7 Net short-term capital gain or loss). Combine lines 1a through 6 in column (h). If you have any long-term capital gains or losses, go to Part II below. Otherwise, go to Part III on the back 7 0 Part II Long-Term Capital Gains and Losses-Generally Assets Held More Than One Year (see instructions) See instructions for how to figure the amounts to enter on the lines below. (g) Adjustments to (d) Proceeds (sales (e) Cost (or other gain or loss from (h) Gain or loss) Subtract column (e) from price) basis) Form(s) 8949, Part column (d) and combine the result with column (g) This form may be easier to complete if you round off cents to whole dollars. II, line 2 column (g) 8a Totals for all long-term transactions reported on Form 1099-B for which basis was reported to the IRS and for which you have no adjustments (see instructions). However, if you choose to report all these transactions on Form 8949, leave this line blank and go to line 8b 0 8b Totals for all transactions reported on Form(s) 8949 with Box D checked 0 od 9 Totals for all transactions reported on Form(s) 8949 with Box E checked 0 10 Totals for all transactions reported on Form(s) 8949 with Box F checked 0 11 Gain from Form 4797, Part 1; long-term gain from Forms 2439 and 6252; and long-term gain or loss) from Forms 4684, 6781, and 8824 11 12 Not long-t gain or loss) from partnerships, S corporations, estates, and trusts from Schedule(s) K-1 12 13 Capital gain distributions. See the instructions 13 14 Long-term capital loss carryover. Enter the amount, if any, from line 13 of your Capital Loss Carryover Worksheet in the instructions (Enter as negative) 14 15 Net long-term capital gain or loss). Combine lines 8a through 14 in column (h). Then go to Part III on the back 15 0