Question 1 (5 Points) During 2015, Edwards Corporation, a calendar year C corpor

Question

Question 1 (5 Points) During 2015, Edwards Corporation, a calendar year C corporation, sold the following business assets on the dates listed below. Compute the amount and character of the gain or loss Edwards Corporation must report from the disposition of each asset. Then determine the sum of each type of gain or loss and the net effect these gains and losses have on Edwards Corporation’s 2015 taxable income. Section 1231 losses in prior years. Please show your Assume that Edwards has no work and explain your calculations. Asset Acquired Computer 1/13/14 Copiers 2/25/05 Office equipment 8/10/11 Office building 7/23/08 Land 7/23/08 Sold Cost 5/16/2015 $104,000 11/25/2015 $148,000 3/10/2015 $80,000 2/12/2015 $160,000 2/12/2015 $40,000 Cost Recovery $37,440 $148,000 $58,580 $30,000 $0 Adjusted Basis $66,560 $0 $21,420 $130,000 $40,000 Sales Price $90,000 $30,000 $20,000 $200,000 $50,000

Explanation / Answer

Computer Copier Office Equipment Office Building Land Asset Acquired 13-Jan-14 25-Feb-05 10-Aug-11 23-Jul-08 23-Jul-08 Sold on 16-May-15 25-Nov-15 10-Mar-15 12-Feb-15 12-Feb-15 Cost $ 104,000.00 $ 148,000.00 $ 80,000.00 $ 160,000.00 $ 40,000.00 Cost Recovery $   37,440.00 $ 148,000.00 $ 58,580.00 $   30,000.00 $                -   Adjusted Basis $   66,560.00 $                   -   $ 21,420.00 $ 130,000.00 $ 40,000.00 Sale Price $   90,000.00 $   30,000.00 $ 20,000.00 $ 200,000.00 $ 50,000.00 Gain $   23,440.00 $   30,000.00 $ -1,420.00 $   70,000.00 $ 10,000.00 Capital Gain $   30,000.00 $ -1,420.00 $   70,000.00 $ 10,000.00 Ordinary Income $   23,440.00 $                   -   $                -   $                   -   $                -   Ordinary Income will be effected by 23,440. Reason: Any assets held for long period for use and when sold the gain or loss can be treated as capital gain or loss. Computer purchased in 2014 and sold in 2015 did not held for lon time. There it is said to be the short term capital. An short term capital gain is treated as ordinary income for income tax purpose.

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