WAR (We Are Rich) has been in business since 1988. 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 2021, Jack Hack and Someday Woods played a round of golf, and Jack, for the first time ever, beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired you to compute his 2021 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 2016- 2020 numbers do not reflect capital loss carryovers. 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 2016 $ 4,000 $ 3,000 2017 $ 2,000 10,000 2018 2019 2020 $ 94,000 $ 170,000 $ 250,000 $ (6,000) $ (15,000) $ 1,000 $ (7,000) $ (7,000) In 2021, Mr. Woods had taxable income in the amount of $480,000 before considering the following events and transactions that transpired in 2021: a. On January 1, 2021, 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, 2021, for $40,000. b. On August 17, 2021, 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, 2017. 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 2021, WAR sold various assets to come up with the funds necessary to invest in WAR's latest and greatest inventionthe three-dimple golf ball. Data on these assets are provided below: Placed in Service (or Asset purchased) Sold Initial Basis Accumulated Depreciation Selling Price Someday's black leather sofa (used in office) Someday's office chair 4/4/20 10/16/21 $ 3,000 $ 540 $ 2,900 3/1/19 11/8/21 8,000 3,000 4,000 Marketable securities 2/1/18 12/1/21 12,000 0 20,000 Land held for investment 7/1/20 11/29/21 45,000 0 48,000 Other investment property 11/30/19 10/15/21 10,000 8,000