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Ed is the sole proprietor of a truck repair shop. He owns his

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shop building along with an...
Ed is the sole proprietor of a truck repair shop. He owns his shop building along with an unimproved lot adjacent to his warehouse. During 2011, the following seven transactions occurred:

1. The lot next door was condemned by the City. The condemnation proceeds were $25,000. The lot had an allocable basis of $40,000. Ed plans to use the proceeds to build up his parts inventory.


2. A truck used 100% for business was sold in December 2011 for $3,500. The truck was purchased ten years back for $9,000 and had an adjusted basis of $2,509 on the date of sale


3. Ed sold his duplex for $ 150,000 on September 1. The rental property was purchased on September 1, 2001 for $100,000 and was being depreciated using straight line method. At the date of sale, the adjusted basis of the building was $74,783


4. Through an E-waste program, Ed disposed of his old computers and printers. They were purchased in 2005 and were obsolete and fully depreciated.


5. Ed sold his BMW on June 1 for $10,600. The automobile was primarily his personal vehicle. He had a loss of $25,000. On May 31, Ed sold his RV for a long term gain of $3,000.


6. Ed’s sheet metal cutting machine (owned three years) was stolen on April 17, but the insurance company will not pay any of the machine’s value because Ed has forgotten to pay his business insurance premium. The machine has a fair value of $7,200 and adjusted basis of $5,208 at the time of theft.

7. Several years ago, Ed inherited a stamp collection from his beloved uncle. He sold the entire lot at an auction for $100,000. At the time of his uncle’s death, the collection was worth $84,000.



A. For each transaction above, what are the amount and nature of recognized gain or loss?

B. What is Ed’s 2011 AGI?
Submitted: 5 years ago.Category: Tax
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6/3/2012
Tax Professional: Megan C, Certified Public Accountant (CPA) replied 5 years ago
Megan C
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1. The lot next door was condemned by the City. The condemnation proceeds were $25,000. The lot had an allocable basis of $40,000. Ed plans to use the proceeds to build up his parts inventory.

$15,000 ordinary loss

2. A truck used 100% for business was sold in December 2011 for $3,500. The truck was purchased ten years back for $9,000 and had an adjusted basis of $2,509 on the date of sale

This is an ordinary gain of $991

3. Ed sold his duplex for $ 150,000 on September 1. The rental property was purchased on September 1, 2001 for $100,000 and was being depreciated using straight line method. At the date of sale, the adjusted basis of the building was $74,783

Long Term Capital Gain of $75,217

4. Through an E-waste program, Ed disposed of his old computers and printers. They were purchased in 2005 and were obsolete and fully depreciated.

No impact - no value received. Computers were fully depreciated.


5. Ed sold his BMW on June 1 for $10,600. The automobile was primarily his personal vehicle. He had a loss of $25,000. On May 31, Ed sold his RV for a long term gain of $3,000.

Losses on sales of personal assets are not taxable, whereas gains are. Ordinary Gain of $3,000


6. Ed’s sheet metal cutting machine (owned three years) was stolen on April 17, but the insurance company will not pay any of the machine’s value because Ed has forgotten to pay his business insurance premium. The machine has a fair value of $7,200 and adjusted basis of $5,208 at the time of theft.

Casualty loss of $5,208

7. Several years ago, Ed inherited a stamp collection from his beloved uncle. He sold the entire lot at an auction for $100,000. At the time of his uncle’s death, the collection was worth $84,000.

This is a long term capital gain subject to a maximum 28% rate as opposed to 15%. His gain is $100,000-84,000 = $16,000

A. For each transaction above, what are the amount and nature of recognized gain or loss?

B. What is Ed’s 2011 AGI?

991+16,000+3000+75217-15000-5208 = $75,000
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,593
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Customer reply replied 5 years ago

For #3, I am not sure which version is correct. Mine or yours?

<table border="0" cellspacing="0" cellpadding="0" width="426">Proceeds from Sale $ 150,000.00 Adjusted Basis Building $ 74,783.00 Total Gain $ 75,217.00 LTCG $ 50,000.00 Depreciation Recupture $ 25,217.00 subject to 25% This is assuming that the depreciation is $25,217 ($100,000-$74,783).

Tax Professional: Megan C, Certified Public Accountant (CPA) replied 5 years ago
I'll look at it thanks
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