Horse and Depreciation Adjusted Basis

Comprehensive Problem Introduction Betty, whose tax rate is 33%, is in the business of breeding and racing horses. Except for the transactions below, she has no other sales or exchanges and she has no unrecaptured net Sec. 1231 liberationes. Consider the pastime transactions that occur during the year * A building with an adjusted derriere of $300,000 is destroyed by fire. Insurance proceeds of $500,000 are received, but Betty does not plan to replace the building. The building was built 12 years agone at a cost of $430,000 and used to provide lodging for her employees.Straight-line derogation has been used. * Four acres of the farm are condemned by the state to protract the highway and Betty receives $50,000. The land was inherited from her mother 15 years ago when its FMV was $15,000. Her mother purchased the land for $10,300. Betty does not plan to purchase additional land. * A racehorse purchased four years ago for $200,000 was s octogenarian for $550,000. Total depreciati on whollyowed using the straight-line method amounts to $160,000. * Equipment purchased three years ago for $200,000 is exchanged for $100,000 of IBM leafy vegetable stock. The adjusted basis of the equipment is $120,000.If straight-line depreciation had been used, the adjusted basis would be $152,000. * An uninsured pony with an adjusted basis of $20,000 and FMV of $35,000, which her daughter uses only for personal use, is hurt while attempting a jump. Because of the injury, the uninsured pony has to be destroyed by a veterinarian. Task(s) a. What amount of Sec. 1245 ordinary income mustiness be recognized? exchange for $200,000 Depreciation adjusted basiss of $152,000 $200,000-$152,000= $48,000 b. What amount of Sec. 1250 ordinary income must be recognized? From insurance $300,000 depreciation ordinary $430,000 300,000-430,000= -70,000 c. Will the loss resulting from the destruction of her daughters pony be used to designate net Sec. 1231 gains or losses? Yes d. What is the amount of the net Sec. 1231 gain or loss? Theres a loss of $15,000 e. After all of the netting of gains or losses is completed, will the gain resulting from the involuntary renascence of the building be treated as LTCG? No the building is old and it would seem not to fall into that category f. What is the amount of her unrecaptured Sec. 1250 gain? I would say zero because she never really sold anything