Question

1) Charles wants to relocate to Florida.  He decided to sell his rental property, which is located in Brooklyn, NY. Charles accepted the following terms:

Charles received $1,200,000 in cash and was relieved of $800,000 mortgage. (this was the outstanding balance at the time the transaction closed). Charles was responsible for broker's fees and legal costs associated with transferring the mortgage of $35,000 and $17,500, respectively.  

Charles' adjusted basis in the rental property is $600,000. (The $600,000 is net of $750,000 of accumulated depreciation expense. Calculate Charles' tax liability for this transaction?  Use the following information to calculate) (Depreciation recapture is 25% and L/T Capital Gain at 20%)

2) Jack started a new accounting practice. He purchased $35,000 of computer equipment and placed the equipment in service in May. (Here is MARCS HY depreciation rates for 5 year property. (Year 1 -20.0%, Year 2 -32.0%, Year 3 -19.2% Year 4 -11.52%, Year 5 -11.52% and Year 6% - 5.76%. Unfortunately, the business was not doing well. In year 3, Jack decided to close the business. He sold the property for $10,500. What is Jack's gain or loss on the sale of the computer equipment?

3) Vicky is planning her wedding in 2020.  In December 2019, she decides to sell 1,000 shares of her Coke Cola stock. She will use the proceeds to pay for the wedding. She receives sales proceeds of $45,000. Her basis in the stock is $50,000. Two weeks later Vicky hears a rumor that Pepsi is going out of business. She decides to repurchase the 1,000 shares of Coke at $47 a share. What is her new basis in the Coke?  

4) Mary purchased on office property in March 2019.  She paid $15,550,000 and incurred closing costs of $50,000.  She made a $1,000,000 down payment and financed the rest of the purchase with a non-recourse loan. The municipality accessed the land and building at $3,000,000 and $12,000,000, respectively.  During the year Mary incurred repairs expense of $2,250.

What is Mary's basis in the land?

Answer 1

2) As given in question, the cost price of the computer equipment is $35,000. The depreciation rate for the equipment is as given below:

Year	Depreciation Rate (in %)
1	20
2	32
3	19.2
4	11.52
5	11.52
6	5.76

Since, the equipment was sold in year 3, the following table shows the final book value:

Year	Adjusted Basis	Depreciation Amount	Book Value
1	$35,000	$7,000	$28,000
2	$28,000	$8,960	$19,040
3	$19,040	$3,656	$15,384

As it is mentioned in the question, that the equipment was sold at a selling price $10,500.

The net Loss is = $15,384 - $10,500 = $4,884