Asked on 1 Jun 2020

Comprehensive Problem 3-71 (LO 3-1, LO 3-2, LO 3-3, LO 3-4, LO 3-5, LO 3-6)

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Moab Inc. manufactures and distributes high-tech biking gadgets. It has decided to streamline some of its operations so that it will be able to be more productive and efficient. Because of this decision, it has entered into several transactions during the year.

  1. Moab Inc. sold a machine used to make computerized gadgets for $29,100 cash. It originally bought the machine for $20,400 three years ago and has taken $8,000 depreciation.
  2. Moab Inc. held stock in ABC Corp., which had a value of $18,000 at the beginning of the year. That same stock had a value of $21,230 at the end of the year.
  3. Moab Inc. sold some of its inventory for $8,200 cash. This inventory had a basis of $5,000.
  4. Moab Inc. disposed of an office building with a fair market value of $81,000 for another office building with a fair market value of $59,800 and $21,200 in cash. It originally bought the office building seven years ago for $68,000 and has taken $15,000 in depreciation.
  5. Moab Inc. sold some land held for investment for $40,000. It originally bought the land for $41,600 two years ago.
  6. Moab Inc. sold another machine for a note payable in four annual installments of $15,000. The first payment was received in the current year. It originally bought the machine two years ago for $44,000 and has claimed $9,600 in depreciation expense against the machine.
  7. Moab Inc. sold stock it held for eight years for $3,350. It originally purchased the stock for $2,400.
  8. Moab Inc. sold another machine for $8,500. It originally purchased this machine six months ago for $9,600 and has claimed $830 in depreciation expense against the asset.

Comprehensive Problem 3-71 Part (1) and (2)

Required:
  1. Determine the gain/loss realized and recognized in the current year for each of these events provided above. Also, determine whether the gain/loss recognized is §1231, capital, or ordinary.
  2. From the recognized gains/losses determined in part 1, determine the net capital gain/loss, the net ordinary gain/loss, and the net capital gain/loss Moab will recognize on its tax return. Moab, Inc. also has $3,200 of non-recaptured §1231 losses from previous years.

Answered on 1 Jun 2020

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