Question

Amber Industries (a sole proprietorship) sold three § 1231 assets during 2018. Data on these property dispositions are as follows: Asset Rack Forklift Bin Cost $100,000 35,000 87,000 Acquired 10/10/14 10/16/15 03/12/17 Depreciation $100,000 23,000 31,000 Sold For $145,000 3,000 60,000 Sold On 10/10/18 10/10/18 10/10/18 a. Determine the amount and the character of the recognized gain or loss from the disposition of each asset. If an amount is zero, enter 0. Character of Gain or Loss Total Amount of Gain or Loss Amount of $ 1245 Recapture Balance of Gain or Loss Asset Rack Ordinary income and § 1231 gain 145,000 145,000 x Forklift § 1231 loss ✓ 9, 0000 9,000 Bin Ordinary income 4,000 4,000 ✓ 0 x of ordinary income due to § 1245 recapture. Additionally, she has $ 9,000 X of net s Amber has $ 1231 gain Feedback Check My Work Section 1245 applies primarily to non-real-estate property such as machinery, trucks, and office furniture. b. Assuming that Amber has $5,000 nonrecaptured net § 1231 losses from the five prior years, analyze these transactions and determine the amount (if any) that will be treated as a long-term capital gain. olx

Answer 1

Requirement A: Compute ordinary income and §1231 gain as follows

Particulars	Amount	Amount
Amount realized		$145,000
Deduct:
Cost	$100,000
Deduct: Accumulated depreciation	($100,000)	$0
Total amount of gain		$145,000
Deduct: Depreciation recaptured (§ 1245)		($100,000)
§ 1231 Gain		$45,000

The company has $104,000 ($100,000 + $4,000) of ordinary income due to §1245 recapture and $36,000 ($45,000 − $9,000) §1231 gain.

Requirement B: The amount of long-term capital gain is $31,000 ($45,000 − $9,000− $5,000)