On the last day of its current tax year, Buy Rite LLC received $170,000 when it...
On the last day of its current tax year, Buy Rite LLC received $170,000 when it sold a machine it had purchased for $60,000 three years ago to use in its business. At the time of the sale, the basis in the equipment had been reduced to $10,000 due to tax depreciation taken. How much did the members’ self-employment earnings from Buy Rite increase when the equipment was sold? [Hint: See §1402(a)(3).]
Self Employment earnings increase by:
a. $10,000
b. $60,000
c. 170,000
d. $0
Homework Answers
OPTION D: $0
EXPLANATION:
As per §1402(a)(3), the gain on sale of a capital asset shall be excluded while computing net earning from self employment. Therefore, self employment earning increase by $0
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