Question

Anna, age 21, is a single individual whose marginal tax rate is 37%. In December of 2019, Anna sold the four assets listed below. With the exception of the stock, all of the assets were used in Anna’s business. Anna did not have any other gains and losses in 2019 and she did not have any unrecaptured Section 1231 losses.

Asset	Acquisition date	Cost	Adjusted basis	Sales price
Stock	4/1/2019	$100,000	$100,000	$120,000
Business land	5/30/2014	$300,000	$300,000	$400,000
Business equipment	7/13/2016	$400,000	$250,000	$500,000
Business machine	11/3/2017	$600,000	$500,000	$550,000

For each asset, identify the amount of taxable income (or tax loss) that Anna must report on her 2019 tax return, and the tax rate that will be applied to the income (or loss).

Enter your answer for each numerical value in the text box. Show support for your work on your scratch paper in order to earn credit.

The taxable income (or tax loss) for the stock is ? and the tax rate is ? .

The taxable income (or tax loss) for the land is ? and the tax rate is ? .

The taxable income (or tax loss) for the equipment is ? and the tax rate is ? .

The taxable income (or tax loss) for the machine is ? and the tax rate is ? .

Answer 1

The taxable income (or tax loss) for the stock is

Stock sale price - stock adjusted base i.e. 120000 - 100000 = $20000

as the Anna is in 37% tax slab which covers income slab $510,301 or more means higher rate of tax as individual , so tax rate will be 37%

The taxable income (or tax loss) for the land is

Land sale price - land adjusted base i.e. 400000- 300000 = 100000 (tax rate will be 37%)

The taxable income (or tax loss) for the equipment is

500000-250000 = $250000 (tax rate will be 37%)

The taxable income (or tax loss) for the machine is

550000 - 500000 = $50000 tax rate will be 37%