WTC (We Take Care) has been in business since 1985. WTC is an accrual method sole proprietorship that deals in the manufacturing and wholesaling of various types of golf equipment. Shank CPAs have filed accurate tax returns for WTCs owner since WTC opened its doors. The managing partner of Shank & Shank (Ryan) has gotten along very well with the owner of WTC Mr. Friday Williams (single but completely takes care of his 8 year old son who lives with him and qualifies as his dependent). However, in early 2018, Jack Shank and Friday Williams played a round of golf and Ryan, for the first time ever, actually beat Mr. Williams. Mr. Williams was so upset that he fired Shank and has hired you to compute his 2018 taxable income. Mr. Williams was able to provide you with the following information from prior tax returns. The taxable income numbers reflect the results from all of Mr. Williams 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 20132017 numbers do not reflect capital loss carryovers.

	2013	2014	2015	2016	2017
Ordinary taxable income	$3,000	$2,500	$68,000	$142,000	$202,000
Other items not included in ordinary taxable income
Net gain (loss) on disposition of 1231 assets	$4,500	8,000		($8,000)
Net long-term capital gain (loss) on disposition of capital assets	($16,000)	$1,200	($9,000)		($6,500)

In 2018, Mr. Williams had taxable income in the amount of $522,000 before considering the following events and transactions that transpired in 2018:

a. On January 1, 2018, WTC purchased a plot of land for $95,000 with the intention of creating a driving range where patrons could test their new golf equipment. WTC never got around to building the driving range; instead, WTC sold the land on October 1, 2018, for $42,000.

b. On August 17, 2018, WTC 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 $21,500 on February 5, 2014. At the time of sale, Iron Byron had an adjusted tax basis of $4,500. WTC sold Iron Byron for $26,000.

c. In the months October through December 2018, WTC sold various assets to come up with the funds necessary to invest in WTCs 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
Fridays black leather sofa (used in office)	4/4/17	10/16/18	$3,200	$550	$2,900
Fridays office chair	3/1/16	11/8/18	$8,000	$2,800	$4,500
Marketable securities	2/1/15	12/1/18	$10,000	$0	$19,000
Land held for investment	7/1/17	11/29/18	$37,000	$0	$42,000
Other investment property	11/30/16	10/15/18	$25,000	$0	$22,000

d. Finally, on May 7, 2018, WTC decided to sell the building where they tested their plutonium shaft, lignite head drivers. WTC purchased the building on January 5, 2005, for $235,000 ($208,000 for the building, $27,000 for the land). At the time of the sale, the accumulated depreciation on the building was $56,000. WTC sold the building (with the land) for $320,000. The fair market value of the land at the time of sale was $48,000.

Required

1. Does the Capital Loss Carryforward rule apply from prior year? If so, calculate in excel the impact for 2018.
2. Does the 1231 Lookback rule apply? If so, what amount is it and how does it impact this years taxable income?
3. Calculate the gain/loss on each transaction.
4. Classify the gain/loss on each transaction as ordinary, section 1231, section 1245, section 1250, or capital gain/loss. Remember, these classifications dictate what tax rate is applied to the income and can be based on use, the amount of time it has been owned, and if it was desposed of as a gain/loss.
5. Calculate Mr. Williams taxable income after taking into account the transactions described above (include your calculation in your submission).
6. Calculate Mr. Williams 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; include your calculation in your submission).
7. Complete Mr. Williams Form 8949, Schedule D, Form 4797, and fill in the appropriate numbers on Schedule 1. Assume that asset bases are not reported to the IRS. Remember each asset should be reported based on their asset type and your total reflected on Schedule 1 should be the total impact these transactions have on taxable income.