Taxation

On December 1, 2008, Gray Manufacturing Company (a corporation) purchased COMMUNICATIONS another company’s assets, including a patent. The patent was used in Gray’s manufacturing operations; $40,500 was allocated to the patent, and it was amortized at the rate of $225 per month. On June 30, 2010, Gray sold the patent for $70,000. Twenty months of amortization had been taken on the patent.

What are the amount and nature of the gain Gray recognizes on the disposition of the patent?

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Write a letter to Gray discussing the treatment of the gain. Gray’s address is 6734 Grover Street, Back Bay Harbor, ME 23890. The letter should be addressed to Siddim Sadatha, Controller.

Delphinium Company owns two parcels of land (§ 1231 assets). One parcel can be DECISION MAKING sold at a loss of $50,000, and the other parcel can be sold at a gain of $70,000. The company has no nonrecaptured § 1231 losses from prior years. The parcels could be sold at any time because potential purchasers are abundant. The company has a $25,000 shortterm capital loss carryover from a prior tax year and no capital assets that could be sold to generate long-term capital gains.

What should Delphinium do based upon these facts?

 

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