WAR (We Are Rich) has been in business since 1989. 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 2022, 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 2022 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 2017-2021 numbers do not reflect capital loss carryovers. Ordinary taxable income 2017 2018 2019 2020 2021 $ 4,460 $ 2,230 $ 99,405 $ 179,775 $ 264,375 Other items not included in ordinary taxable income: Net gain (loss) on disposition of 1231 assets $ 3,690 11,150 $ (7,380) Net long-term capital gain (loss) on disposition of capital assets $ (16,725) $ 1,230 $ (22,600) $ (9,300) a. On January 1, 2022, WAR purchased a plot of land for $111,500 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, 2022, for $44,600. b. On August 17, 2022, 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 $26,600 on February 5, 2018. At the time of sale, "Iron Byron" had an adjusted tax basis of $8,600. WAR sold "Iron Byron" for $36,500. c. In the months October through December 2022, 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: Asset Someday's black leather Placed in Service (or purchased) Sold Initial Basis Accumulated Depreciation Selling Price sofa (used in office) 4/4/21 10/16/22 $ 3,920 $ 770 $ 3,590 Someday's office chair 3/1/20 11/8/22 9,840 3,460 5,150 Marketable securities 2/1/19 12/1/22 14,760 0 22,300 Land held for investment Other investment 7/1/21 11/29/22 56,500 0 58,350 property 11/30/20 10/15/22 21,500 0 17,200 d. Finally, on May 7, 2022, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR purchased the building on January 5, 2010, for $247,500 ($216,000 for the building, $31,500 for the land). At the time of the sale, the accumulated depreciation on the building was $61,500. WAR sold the building (with the land) for $369,000. The fair market value of the land at the time of sale was $56,500. Note: Do not round intermediate 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 or (Loss) Depreciation Recapture 1231 Ordinary income or (Loss) Short Term Long Term Long term Long term Long term Total 28% 25% 0/15/20% a. Land (66,900) 0 0 (66,900) 0 $ 0 $ 0 0 b. Iron Byron 27,900 18,000 9,900 0 0 0 0 0 0 c1. Sofa 440 770 0 0 0 0 0 0 0 c2. Chair (1,230) (1,230) 0 0 0 0 0 0 c3. Marketable securities 7,540 0 0 0 0 7,540 0 0 7,540 c4. Land - for investment 1,850 0 0 0 0 1,850 0 0 1,850 c5. Investment property (4,300) 0 0 0 (4,300) 0 0 (4,300) d1. Building 65,000 0 65,000 0 0 0 0 0 d2. Land 25,000 0 25,000 0 0 0 0 0 0 55,300 18,770 98,670 (66,900) 0 5,090 0 0 5,090 1231 netting Step 1 - depreciation recapture - ordinary income Step 2 - $1231 Gain or Loss netting - gains or losses exclusive of $1250 - Unrecapture $1250 Step 3 lookback rule -apply to unrecapture $1250 first Ordinary income Remaining unrecapture $1250 Remaining gain 0/15/20 Capital gain netting: Long term capital loss carryover Reclassified 18,770 98,670 (66,900) 0 5,090 0 0 5,090 5,090 0 0 5,090 Taxable Income: Before transactions Ordinary income/loss LTCG @ 25% LTCG @ 0/15/20% Taxable income $ 0