McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 23

Hart, an individual, bought an asset for $500,000 and has claimed $100,000 of depreciation deductions against the asset.Hart has a marginal tax rate of 30 percent.Answer the questions presented in the following alternative scenarios (assume Hart had no property transactions other than those described in the problem):
a.What is the amount and character of Hart's recognized gain if the asset is tangible personal property sold for $450,000? What effect does the sale have on Hart's tax liability for the year?
b.What is the amount and character of Hart's recognized gain if the asset is tangible personal property sold for $550,000? What effect does the sale have on Hart's tax liability for the year
c.What is the amount and character of Hart's recognized gain if the asset is tangible personal property sold for $350,000? What effect does the sale have on Hart's tax liability for the year?
d.What is the amount and character of Hart's recognized gain if the asset is a non-residential building sold for $450,000? What effect does the sale have on Hart's tax liability for the year?
e.Now assume that Hart is a corporation.What is the amount and character of its recognized gain if the asset is a nonresidential building sold for $450,000? What effect does the sale have on Hart's tax liability for the year (assume the same 30 percent marginal tax rate)?
f.Now assuming that the asset is real property, which entity type should be used to minimize the taxes paid on real estate gains?