Questions from Taxation

Q: A fire recently destroyed a warehouse owned by Company J. Its

A fire recently destroyed a warehouse owned by Company J. Its adjusted basis in the warehouse was $489,000. However, the warehouse’s replacement value (cost to rebuild) was $610,000. Determine the tax...

Q: Refer to the facts in the preceding example. For its second

Refer to the facts in the preceding example. For its second taxable year, Rony Inc.’s accounting records showed the following. Net income before tax ……………………………………….…………$1,200,000 Reversal of year 1...

Q: Firm OCS sold business equipment with a $20,000 initial

Firm OCS sold business equipment with a $20,000 initial cost basis and $7,315 accumulated tax depreciation. In each of the following cases, compute OCS’s recaptured ordinary income and Section 1231 ga...

Q: Company B disposed of obsolete computer equipment with a $32,

Company B disposed of obsolete computer equipment with a $32,000 initial cost basis and $27,000 accumulated depreciation. Determine the amount and character of Company B’s recognized gain or loss if:...

Q: Firm L owns a commercial building that is divided into 23 offices

Firm L owns a commercial building that is divided into 23 offices. Several years ago, it leased an office to Company K. As part of the lease agreement, Firm L spent $29,000 to construct new interior w...

Q: Lyle Company owns commercial real estate with a $360,000

Lyle Company owns commercial real estate with a $360,000 initial cost basis and $285,000 accumulated straight-line depreciation. The real estate is subject to a $120,000 recourse mortgage and has an a...

Q: Change the facts in the preceding problem by assuming that the $

Change the facts in the preceding problem by assuming that the $120,000 mortgage on Lyle’s real estate is nonrecourse. Determine the tax consequence to Lyle if the mortgage holder forecloses on the re...

Q: XYZ exchanged an old building for a new like-kind building

XYZ exchanged an old building for a new like-kind building. XYZ’s adjusted basis in the old building was $13,000 ($30,000 initial cost − $17,000 accumulated depreciation), and its FMV was $20,000. Bec...

Q: OCD exchanged old realty for new like-kind realty. OCD’s

OCD exchanged old realty for new like-kind realty. OCD’s adjusted basis in the old realty was $31,700 ($60,000 initial cost − $28,300 accumulated depreciation), and its FMV was $48,000. Because the ne...

Q: Firm ML, a non corporate taxpayer, exchanged residential rental property

Firm ML, a non corporate taxpayer, exchanged residential rental property plus $15,000 cash for 20 acres of investment land with a $200,000 FMV. ML used the straight-line method to compute depreciation...