Question

Compute gain or loss for 2018 for Betty, aged 58, and indicate if ordinary or capitol on the following items.

If there is non-recognition of gain or loss, say so.

A. Betty sold a gold charm bracelet her father gave her for “sweet 16”. He paid $125 and she sold it for $480

B. She decided she no longer needed her car. She paid 34,800 in 2012 and sold it for 9,200

C. She traded her warehouse in Brooklyn for a warehouse in Connecticut.   She paid 145,000 in 1981 and was allowed to depreciate the entire cost. (MACRS was developed in 1986). In 2018 it was worth $450,000. The Connecticut building was $350,000. She got the building and $100,000 in the exchange.

D. She purchased and sold Green Co Stock as follows:

100 shares purchased Feb. 15, 2014 at 42 share

100 shares purchased Nov. 30, 2014 at 46 share

300 shares purchased January 25, 2016 at 49 share

250 shares sold December 18, 2018 at 50 share

E. She inherited 500 of Red from her Aunt Mary. Cost to Aunt Mary in 2011 was $45,000, value on November 15, 2018 when Aunt Mary died was $82,000. Betty sold the stock on February 1, 2017 for 8,500.

F. Her business sold the following items:

Fork-lift, purchased 2015, cost 150,000, MACRS to date (including ½ allowable 2018) 95,000. Sold for 65,000

Deliver truck, purchased 2014, cost 95,000, section 179 used, sold for 43,000.

Warehouse building, purchased 2010 for 850,000, MACRS allowed (including 2018) 120,000, sold for 1,350,000.

Answer 1

every loss or gain will be termed as ordinary when it is relate to business of Betty. Since nine of the transactions are related to business of Betty , all will be termed as capital in nature.

A. Gain of 480-125 = 355

B. Loss of 34800-9200 = 25600 (assumed there is no depreciation on car as related data is missing)

C. Gain of 350000+100000 = 450000

D. Purchase value of shares (100*42)+(100*46)+(50*49) = 11250

sold for 250*50 = 12500

So gain of 12500- 11250 = 1250.

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Rashi Aggarwal