1. Kendra Brown, a sole proprietor, acquires a new five-year asset on April 17, 2014, for $480,000. This is the only asset acquire by Kendra during the year. Kendra does NOT elect §179 and elects out of bonus depreciation. On September 1, 2014, she sells the asset.
a. Determine the cost recovery for 2014
b. Determine the cost recovery for 2015
2. In 2014, Sandal, Inc has qualified production activities income (QPAI) of $3.75 million and taxable income of $4 million. Sandal pays independent contractors $500,000. Sandal's W-2 wages are $450,000, but only $225,000 of the wages paid are to employees engaged in qualified domestic production services.
a. How much is the domestic production activities deduction (DPAD) for Sandal, Inc. in 2013?
b. What suggestions might help Sandal increase its DPAD?
3. Juan acquired an apartment building on November 14, 2014, for $2.74 million. The value of the land was $440,000. Juan sold the apartment on October 22, 2020.
a. Determine his cost recovery for 2014
b. Determine his cost recovery for 2020
c. Determine his adjusted basis for the building as of the date of sale.
d. If Juan sold the building for $2.5 million, how much was his gain?
4. Answer #3 again, assuming the building was a manufacturing plant instead of an apartment building.