Required information [The following information applies to the questions displayed below.) WAR (We Are Rich) has been in business since 1986. 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 WAR's owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with the owner of WAR-Mr. Someday Woods (single). However, in early 2019, Jack Hack and Someday Woods played a round of golf and Jack, for the first time ever, actually beat Mr. Woods. Mr. Woods w Hack & Hack and has hired you to compute his 2019 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. Wood'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 2014-2018 numbers do not reflect capital loss carryovers. $ 2014 4,000 2015 $2,000 2016 $94,000 2017 $170,000 2018 $250,000 Ordinary taxable income other items not included in ordinary taxable income: Net gain (loss) on disposition of $1231 assets Net long-term capital gain (loss) on disposition of capital assets $ 3,000 10,000 $ (6,000) $(15,000) $1,000 $(7,000) $ 17,000) In 2019, Mr. Woods had taxable income in the amount of $480,000 before considering the following events and transactions that transpired in 2019: a. On January 1, 2019, 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, 2019, for $40,000. b. On August 17, 2019, 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, 2015. At the time of sale, "Iron Byron" had an adjusted tax basis of $4,000. WAR sold "Iron Byron" for $25,000. c. In the months October through December 2019, WAR sold various assets to come up with the funds necessary to invest in WAR's latest and greatest invention---the three-dimple golf ball. Data on these assets are provided below: Placed in Service (or purchased) Initial Accumulated Selling Basis Depreciation Price Sold $ Asset Someday's black leather sofa (used in office) Someday's office chair Marketable securities Land held for investment Other investment property 540 3,000 4/4/18 3/1/17 2/1/16 7/1/18 11/30/17 10/16/19 11/8/19 12/1/19 11/29/19 10/15/19 $ 3,000 8,000 12,000 45,000 10,000 $ 2,900 4,000 20,000 48,000 8,000 0 0 d. Finally, on May 7, 2019, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR purchased the building on January 5, 2007, 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 inte computations. Round your final answers to the nearest whole dollar amount. Loss amounts should be indicated by a minus sign.) Compute Mr. Woods's taxable income after taking into account the transactions described above. Description Gain (Loss) Depreciation Recapture $1231 Ordinary income (Loss) Short Term Long Term Total LT 28% LT 25% 20% b Land Iron Byron Sofa Chair Marketable securities Land - for investment Investment property Building Land 51231 netting Step1 - depreciation recapture - ordinary income Step 2 - 51231 GL netting Required information Step 2 - $1231 G/L netting -gains/losses exclusive of $1250 - Unrecap $1250 Step 3 - lookback rule - apply to unrecap $1250 first Ordinary income Remaining unrecap $1250 Remaining gain - 0/15/20 Capital gain netting Step 1 Step 2 Step 3 Step 4 Subtotal Step 5 Step 6 Required information Step 6 Step 7 Subtotal Step 8 Step 9 Total $ 480,000 Taxable income: Before transactions Ordinary income LTCG @ 25% LTCG @ 0/15/20% Taxable income Required information [The following information applies to the questions displayed below.) WAR (We Are Rich) has been in business since 1986. 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 WAR's owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with the owner of WAR-Mr. Someday Woods (single). However, in early 2019, Jack Hack and Someday Woods played a round of golf and Jack, for the first time ever, actually beat Mr. Woods. Mr. Woods w Hack & Hack and has hired you to compute his 2019 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. Wood'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 2014-2018 numbers do not reflect capital loss carryovers. $ 2014 4,000 2015 $2,000 2016 $94,000 2017 $170,000 2018 $250,000 Ordinary taxable income other items not included in ordinary taxable income: Net gain (loss) on disposition of $1231 assets Net long-term capital gain (loss) on disposition of capital assets $ 3,000 10,000 $ (6,000) $(15,000) $1,000 $(7,000) $ 17,000) In 2019, Mr. Woods had taxable income in the amount of $480,000 before considering the following events and transactions that transpired in 2019: a. On January 1, 2019, 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, 2019, for $40,000. b. On August 17, 2019, 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, 2015. At the time of sale, "Iron Byron" had an adjusted tax basis of $4,000. WAR sold "Iron Byron" for $25,000. c. In the months October through December 2019, WAR sold various assets to come up with the funds necessary to invest in WAR's latest and greatest invention---the three-dimple golf ball. Data on these assets are provided below: Placed in Service (or purchased) Initial Accumulated Selling Basis Depreciation Price Sold $ Asset Someday's black leather sofa (used in office) Someday's office chair Marketable securities Land held for investment Other investment property 540 3,000 4/4/18 3/1/17 2/1/16 7/1/18 11/30/17 10/16/19 11/8/19 12/1/19 11/29/19 10/15/19 $ 3,000 8,000 12,000 45,000 10,000 $ 2,900 4,000 20,000 48,000 8,000 0 0 d. Finally, on May 7, 2019, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR purchased the building on January 5, 2007, 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 inte computations. Round your final answers to the nearest whole dollar amount. Loss amounts should be indicated by a minus sign.) Compute Mr. Woods's taxable income after taking into account the transactions described above. Description Gain (Loss) Depreciation Recapture $1231 Ordinary income (Loss) Short Term Long Term Total LT 28% LT 25% 20% b Land Iron Byron Sofa Chair Marketable securities Land - for investment Investment property Building Land 51231 netting Step1 - depreciation recapture - ordinary income Step 2 - 51231 GL netting Required information Step 2 - $1231 G/L netting -gains/losses exclusive of $1250 - Unrecap $1250 Step 3 - lookback rule - apply to unrecap $1250 first Ordinary income Remaining unrecap $1250 Remaining gain - 0/15/20 Capital gain netting Step 1 Step 2 Step 3 Step 4 Subtotal Step 5 Step 6 Required information Step 6 Step 7 Subtotal Step 8 Step 9 Total $ 480,000 Taxable income: Before transactions Ordinary income LTCG @ 25% LTCG @ 0/15/20% Taxable income