Question

This year, Sigma Inc. generated $627,000 income from its routine business operations. In addition, the corporation sold the following assets, all of which were held for more than 12 months.

	InitialBasis		Acc.Depr.*		Sale Price
Marketable securities	$	153,400	$	0	$	72,750
Production equipment		121,600		97,280		35,250
Business realty:
Land		168,750		0		190,000
Building		255,000		76,500		211,000

Compute Sigma’s taxable income assuming that it used the straight-line method to calculate depreciation on the building and has no nonrecaptured Section 1231 losses.

Taxable Income = ___________

Answer 1

To calculate loss or profit formula is sales- (purchase- depreciation)

1. Loss on marketable securities is 72750-153400= (80650)

2. Profit on production equipment is 35250-(121600-97280)=10930

3. Profit on land is 190000-168750=21250

4. Profit on building is 211000-(255000-76500)= 32500

Total capital loss on fixes assets is (80650)+10930+21250+32500=(15970)

So taxable income is 627000

Because capital loss can not be setoff against any loss other than capital gain.