Answered Essay: Brandon, an individual, began business four years ago and has sold sect 1231 assets with $5,850 of losses within the last 5 years. Brand

Brandon, an individual, began business four years ago and has sold 91231 assets with $5,850 of losses within the last 5 years. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets: Accumulated Original Cost Depreciation $8,700 Asset Machinery Land Building $31,700 57,000 124,000 Gain/Loss 10,850 28,500 (22,000) 37,000 Assuming Brandons marginal ordinary income tax rate is 35 percent, what effect do the gains and losses have on Brandons tax liability? o $14,550 §1231 gain, $2.800 ordinary income, and $3163 tax liability. $17,350 ordinary income, $6,073 tax liability. O $2.80051231 gain, $14,550 ordinary income, and $5,513 tax liability. o $17,350 §1231 gain and $2.603 tax liability. None of the choices are correct.

Brandon, an individual, began business four years ago and has sold sect 1231 assets with $5,850 of losses within the last 5 years. 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? $14,550 sect 1231 gain, $2,800 ordinary income, and $3163 tax liability. $17,350 ordinary income, $6,073 tax liability. $2,800 sect 1231 gain, $14,550 ordinary income, and $5,513 tax liability. $17,350 sect 1231 gain and $2,603 tax liability. None of the choices are correct.

Expert Answer

 

Answer :- Option B). $ 17,350 ordinary income, $ 6,073 tax liability.

Explanation :- Ordinary income of Brandon = 10850 + 28500 – 22000.

= $ 17350.

Tax liability of Brandon = 35 % of 17350.

= $ 6072.50 (Rounded off to $ 6073).

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