Required information The following information applies to th

Required information [The following information applies to the questions displayed below.] 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. (Do not round intermediate computations.) a. Moab Inc. sold a machine that it used to make computerized gadgets for $27,300 cash. It originally bought the machine for $19,200 three years ago and has taken $8,000 depreciation. b. Moab Inc. held stock in ABC Corp. which had a value of $12,000 at the beginning of the year. That same stock had a value of $15,230 at the end of the year c. Moab Inc. sold some of its inventory for $7,000 cash. This inventory had a basis of $5,000. d. Moab Inc. disposed of an office building with a fair market value of $75,000 for another office building with a fair market value of $55,000 and $20,000 in cash. It originally bought the office building seven years ago for $62,000 and has taken $15,000 in depreciation e. Moab Inc. sold some land held for investment for $28,000. It originally bought the land for $32,000 two years ago f. Moab Inc. sold another machine for a note payable in four annual installments of $12,000. The first payment was received in the current year. It originally bought the machine two years ago for $32,000 and has claimed $9,000 in depreciation expense against the machine g. Moab Inc. sold stock it held for eight years for $2,750. It originally purchased the stock for $2,100 h. Moab Inc. sold another machine for $7,300. It originally purchased this machine six months ago for $9,000 and has claimed $830 in depreciation expense against the asset. Complete Moab Inc\'s Form 4797 for the year. oab\'s Inc\'s identifying number: 57-1234567

Solution

Asset RealizedGain/Loss RecognizedGain/Loss Character 1a $16,100 $16,100 $8,000 §1245 recapture; $8,100§1231 gain 1b 0 0 No realisation 1c 2000 2000 ordinary income 1d 28000 20000* $3,000 §291                                                             recapture; $17,000 §1231 gain 1e -4000 -4000 Long term capital loss 1f 25000 13000* * $9,000 §1245 recapture; $4,000§1231 gain 1g 650 650 Long term capital gain 1h 870 870 Ordinary loss; not held more than12 months * Moab recognizes $20,000 gain due to the boot received in the like-kind exchange. The remaining gain is deferred **$13,000 recognized gain consists of $9,000 depreciation recapture (required to be recognized in year of sale andnot eligible for installment sale treatment) and $4,000 [($16,000 remaining gain/$48,000 amount realized) x$12,000 cash received in year of sale]. Moab will realize $23,750 in net capital gains and $23,130 in ordinary income. This is computed as follows: Description Amount Explaniation §1231 Netting Process: 1(§1231 gain) $29,100 $8,100 from 1a +17,000from 1d +4,000 from 1f (2)§1231 loss 0 (3)Net §1231 gain $29,100 1+2 (4)Unrecaptured §1231 losses $2,000 OrdinaryNet §1231 gain$27,100 (3)(4); treated as LTCG Ordinary Income: 1)§1245 recapture $17,000 $8,000 from 1a + 9,000 from1f 2)§291 recapture $3,000 from 1d 3)Ordinary income $2,000 from 1c 4)Ordinary loss ($870) from 1h 5)Ordinary incomefrom §1231 netting $2,000 rule Total $23,130 1+2+3+4 Capital Gains and Losses: (1)Capital gain $27,750 $650 from 1g + 27,100 from§1231 netting 2)Capital loss $4,000 from 1 e Net capital gain $23,750 1+2