Question

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 32 percent.answer the questions presented in the following alternative scenarios (assume hart had no property transactions other than those described in the problem):note: loss amounts should be indicated by a minus sign. enter na if a situation is not applicable. leave no answer blank. enter zero if applicable.problem 11-45 part-e (static)required:e1. now assume that hart is a c corporation. what are the amount and character of its recognized gain or loss if the asset is a nonresidential building sold for $450,000?e2. what effect does the sale have on hart's tax liability for the year (assume a 21 percent tax rate)?

Answer 1

As a C corporation, Hart would recognize a loss of $50,000 if the nonresidential building is sold for $450,000. The sale would affect Hart's tax liability by reducing it due to the recognized loss.

Step-by-step explanation:

E1. As a C corporation, the amount of recognized gain or loss on the sale of a nonresidential building for $450,000 can be calculated by subtracting the adjusted basis of the building from the selling price. In this case, the adjusted basis is the original cost of $500,000 minus the accumulated depreciation of $100,000, which equals $400,000. So, the recognized loss would be $450,000 - $400,000 = $50,000.

E2. The sale of the building will affect Hart's tax liability for the year as a C corporation at a 21 percent tax rate. The recognized loss of $50,000 can be deducted from the corporation's taxable income, reducing its overall tax liability. The exact impact on the tax liability will depend on the corporation's total income and deductions for the year.