Question

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Aruna, a sole proprietor, wants to sell two assets that she no longer needs for her business. Both assets qualify as §1231 assets. The first is machinery and will generate a $10,000 §1231 loss on the sale. The second is land that will generate a $7,000 §1231 gain on the sale. Aruna’s ordinary marginal tax rate is 32 percent. (Input all amounts as positive values.)

a. Assuming she sells both assets in December of year 1 (the current year), what effect will the sales have on Aruna’s tax liability?

Answer 1

GIVEN THAT ,

According to the question we have that ,

* The first is machinery and will generate a $10,000 §1231 loss on the sale.

** The second is land that will generate a $7,000 §1231 gain on the sale.

*** Aruna’s ordinary marginal tax rate is 32 percent.

TO FIND :-Assuming she sells both assets in December of year 1 (the current year), what effect will the sales have on Aruna’s tax liability?

now

we have that ,

==> §1231 loss on the sale. = 10000 (amount)

the rate % = 32

** tax = 10000*32% = 3200

==>  §1231 gain on the sale. = 7000 (amount)

the rate % = 32

** tax = 7000*32% = 2240

therefore ,

total tax liability = 3200-2240

= 960

therefore

total tax liability =960

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