Problem: In 2012, Wilson had ordinary taxable income of $325,000 before considering any property transactions. Wilson had no prior year Section 1231 losses. During 2012, Wilson had the following property dispositions.
1) Wilson sold two blocks of stocks held for investment. The sale of one block of stock yielded a short-term capital gain of $8,000. The sale of the second block of stock yielded a long-term capital gain of $14,000.
2) Wilson sold four pieces of equipment that was used for three years in business operations for $30,000. The equipment originally cost $50,000 and $35,000 of MACRS deductions had been taken, leaving an adjusted basis at the time of sale of $15,000 in the equipment.
3) Wilson also had equipment stolen that had been used in the business operations for two years. The adjusted basis of the equipment was $10,000 and the insurance company paid Janeway $5,000 on the claim.
4) Wilson sold a building for $500,000 that was used for twelve years in business operations. The building was purchased for $390,000 and MACRS depreciation deductions of $90,000 had been taken, leaving an adjusted basis at the time of sale of $300,000 in the building.
a. Determine the amount and classification of each gain or loss arising from the property dispositions described above. Then net the gains and losses and determine Wilson's federal taxable income for 2012 assuming Wilson is a C corporation.
b. Determine the amount and classification of each gain or loss arising from the property dispositions described above. Then net the gains and losses and determine Wilsons federal taxable income for 2012 assuming Wilson is a single individual who is a sole proprietor.