TB MC Qu. 11-65 Brandon, an individual, began business four...

Brandon, an individual, began business four years ago and has sold 1231 assets with $5,350 of losses within the last 5 years. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets:

Asset	Original Cost		Accumulated Depreciation		Gain/Loss
Machinery	$	30,700	$	7,700	$	10,350
Land		47,000		0		23,500
Building		104,000		27,000		(12,000	)

Assuming Brandon's marginal ordinary income tax rate is 32 percent, what effect do the gains and losses have on Brandon's tax liability?

Use Dividends and Capital Gains Tax Rates for reference.

Multiple Choice

• $8,800 1231 gain, $13,050 ordinary income, and $5,496 tax liability.

• $21,850 ordinary income, $6,992 tax liability.

• $21,850 1231 gain and $3,278 tax liability.

• None of the choices are correct.

• $13,050 1231 gain, $8,800 ordinary income, and $4,774 tax liability.