Brandon,an individual,began business four years ago and has never sold a §1231 asset.Brandon owned each of the assets for several years.In the current year,Brandon sold the following business assets: Assuming Brandon's marginal ordinary income tax rate is 35 percent,what effect do the gains and losses have on Brandon's tax liability?
A)$7,000 ordinary income,$1,000 §1231 loss and $2,100 tax liability.
B)$6,000 ordinary income and $2,100 tax liability.
C)$7,000 §1231 gain and $2,450 tax liability.
D)$7,000 §1231 gain and $1,050 tax liability.
E)None of thesE.The depreciation recapture of $7,000 becomes ordinary income.The $4,000 §1231 loss becomes an ordinary loss and offsets the $3,000 §1231 gain on the machinery.The $1,000 net §1231 loss becomes ordinary and offsets the $7,000 ordinary gain.The remaining ordinary gain of $6,000 is taxed at 35 percent which results in $2,100 of tax.

Question

Brandon,an individual,began business four years ago and has never sold a §1231 asset.Brandon owned each of the assets for several years.In the current year,Brandon sold the following business assets:  Assuming Brandon's marginal ordinary income tax rate is 35 percent,what effect do the gains and losses have on Brandon's tax liability?
A)$7,000 ordinary income,$1,000 §1231 loss and $2,100 tax liability. 
B)$6,000 ordinary income and $2,100 tax liability. 
C)$7,000 §1231 gain and $2,450 tax liability. 
D)$7,000 §1231 gain and $1,050 tax liability. 
E)None of thesE.The depreciation recapture of $7,000 becomes ordinary income.The $4,000 §1231 loss becomes an ordinary loss and offsets the $3,000 §1231 gain on the machinery.The $1,000 net §1231 loss becomes ordinary and offsets the $7,000 ordinary gain.The remaining ordinary gain of $6,000 is taxed at 35 percent which results in $2,100 of tax.

Quizplus · Accepted Answer

The Answer of Brandon,an individual,began business four years ago and has never sold a §1231 asset.Brandon owned each of the assets for several years.In the current year,Brandon sold the following business assets:  Assuming Brandon's marginal ordinary income tax rate is 35 percent,what effect do the gains and losses have on Brandon's tax liability?
A)$7,000 ordinary income,$1,000 §1231 loss and $2,100 tax liability. 
B)$6,000 ordinary income and $2,100 tax liability. 
C)$7,000 §1231 gain and $2,450 tax liability. 
D)$7,000 §1231 gain and $1,050 tax liability. 
E)None of thesE.The depreciation recapture of $7,000 becomes ordinary income.The $4,000 §1231 loss becomes an ordinary loss and offsets the $3,000 §1231 gain on the machinery.The $1,000 net §1231 loss becomes ordinary and offsets the $7,000 ordinary gain.The remaining ordinary gain of $6,000 is taxed at 35 percent which results in $2,100 of tax.

Brandon,an Individual,began Business Four Years Ago and Has Never Sold