ACCT 8043 Spring 2024 Module 5 Required Homework Problem
Topic: Property Transactions: Section 1231 and Recapture
Problem:
Julie Hernandez is single and has no dependents. She operates a dairy farm, and her Social Security number is 000-00-1111. She lives at 1325 Vermont Street in Costa, Florida, 44215. Consider the following information for the current year (2021):
• Schedule C was prepared by her accountant and the net profit from the dairy operations is $48,000.
• Itemized deductions amount to $4,185.
• Dividend income (qualified dividend) amounts to $280. She had no transactions involving virtual currency during the year.
• State income tax refund received during the year is $125. She did not itemize last year.
• In June, a burglar broke into her house and stole the following two assets, which were acquired in 1989:
The following assets used in her business were sold during the year:
Acquisition Original Depreciation Date of Sale Selling Price
Tractor 6/10/2011 $25,000 $25,000 10/20/2021 $8,300
Barn 5/23/2001 90,000 61,000 05/13/2021 87,000
Land 5/23/2001 15,000 ---0--- 05/13/2021 27,000
Cows 9/7/2019 20,000 13,000 11/08/2021 21,000
In August, three acres of the farm were taken by the state under the right of eminent domain for the purpose of building a highway. The basis of the three acres is $1,500, and the state paid the FMV, $22,000, on February 10, 2021. The farm was purchased on August 12, 1988.
Nonrecapture net Section 1231 losses from the five most recent tax years preceding the current year amount to $7,000. Estimated taxes paid during the year amount to $32,000.
Require:
Prepare Julie’s 2021 Forms 1040 and schedule 1, 4684 Section A, 4797, and Schedule D. Carefully fill in all applicable boxes. Worksheets submissions are optional. Do not consider the alternative minimum tax or self-employment taxes. Refer to instructions for 4684 and 4797; follow instructions for any need to be carried from 4684 and/or 4797 to Schedule D.