Question

Lorenzo is the sole proprietor of a trampoline shop. During 2019, the following transactions occurred.Unimproved land adjacent to the store was condemned by the city on February 1. The condemnation proceeds were $15,000. The land, acquired in 1986, had an allocable basis of $40,000. Lorenzo has additional parking across the street and plans to use the condemnation proceeds to build his inventory.A truck used to deliver trampolines was sold on January 2 for $3,500. The truck was purchased on January 2, 2014, for $6,000. On the date of sale, the adjusted basis was zero.Lorenzo sold an antique rowing machine at an auction. Net proceeds were $4,900. The rowing machine was purchased as used equipment 17 years ago for $5,200 and is fully depreciated.Lorenzo sold an apartment building for $300,000 on September 1. The rental property was purchased on September 1, 2015, for $150,000 and was being depreciated over a 27.5-year MACRS life using the straight-line method. At the date of sale, the adjusted basis was $124,783.Lorenzo's personal yacht was stolen on September 5. The yacht had been purchased in August at a cost of $25,000. The fair market value immediately preceding the theft was $19,600. Lorenzo was insured for 50% of the original cost, and he received $12,500 on December 1.Lorenzo sold a Buick on May 1 for $9,600. The vehicle had been used exclusively for personal purposes. It was purchased on September 1, 2014, for $20,800.Lorenzo's trampoline stretching machine (owned two years) was stolen on May 5, but the business's insurance company will not pay any of the machine's value because Larry failed to pay the insurance premium. The machine had a fair market value of $8,000 and an adjusted basis of $6,000 at the time of theft.Lorenzo had AGI of $102,000 from sources other than those described above.Lorenzo has no non-recaptured § 1231 lookback losses.For each transaction, what are the amount and nature of recognized gain or loss?What is Lorenzo's 2019 Adjusted Gross Income?

Answer 1

Explanation:

we have to get The Amount and nature of recognized gain or loss for each transaction:

a.  The condemnation proceeds = $15,000.  allocable basis of acquired land = $40,000."

loss = $40,000 - $15,000

= $25,000

b. sale of truck = $3,500. the adjusted basis = 0

Gain = $3,500 - 0 = $3,500

c.

As rowing machine was sold for 4900 and is fully depreciated, with an adjusted basis of 0

Gain = $4,900 - 0 = $4,900

d. sale of apartment = 300000

adjusted basis = $124,783

when we subtract we get :

The Overall gain would be = $300,000 - $124,783 = $175,217

Unrecaptured Section gain = $150,000 - $124,783 = $25,217

Regular long-term capital gain = Overall gain - Uncaptured section gain

This is:

= $175,217 - $25,217 = $150,000

e. his yatch was stolen, it had cost $25,000. The fair market value = $19,600. he was insured for 50% of the original cost, of which he got $12,500 on December 1."

Then Tax loss = Fair market value - Amount received from insurance

$19600-$12,500 = $7,100

so we have here a tax loss of $7,100 ( before any AGI limitation),

f. he sold a Buick for $9,600.  It was bought for $20,800."

Loss = $20,800 - $9,600 = $11,200

a non-deductible personal loss.

g. after his trampoline machine was stolen. fair market value was 8000, adjusted basis = 6000

Tax Loss = $6,000

lorenzos Adjusted Gross Income for 2019 = $102,000 + $3,500 + $4,900 + $150,000 - $6,000 = $254,400