Lily Tucker (single) owns and operates a bike shop as a sole proprietorship. Thi

Question

Lily Tucker (single) owns and operates a bike shop as a sole proprietorship. This year, she sells the following long-term assets used in her business:

Lily's taxable income before these transactions is $170,000.

What are Lily's taxable income and tax liability for the year? Use Tax Rate Schedule for reference. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)

    

Asset Sales Price Cost Accumulated Depreciation Building $344,700 $300,500 $64,500 Equipment $120,000 $210,700 $27,900

Explanation / Answer

Answer

Total Taxable income =170000+46600 =$216600

Taxable income before transaction = $170000

Tax Liability = (170000 - 85650)*28%+17442 =$23618+17442 =$41060

Capital gain 46600*25% = $11650

Total Tax Liability = 41060+11650 =$52710

Gain/ loss on building 344700 - (300500-64500) 108700 Gain /(loss) on equipment 120000 - (210000-27900) (62100) Net gain / (loss) 46600

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