Monique is planning to increase the size of the manufacturing business that she operates as a sole proprietorship. She has a number of older assets…

Monique is planning to increase the size of the manufacturing business that she operates as a sole proprietorship. She has a number of older assets that she will replace as part of the expansion. In addition, to finance this expansion she will have to sell some of her personal assets. Because it is close to the end of the tax year, she can time the sales of the assets to take the greatest advantage of the tax laws. Monique is currently in the 35 percent tax bracket.

Following are the assets that Monique plans to sell; assume that she will realize their fair market value on the sales:

Business Assets            Acquisition             Fair Market           Department                    Adjusted                          Original

                                           Date                          Value                   Method                          Basis                                   Cost

1. Truck                             1995                           3,000                   MACRS                           0.00                             20,000

2. 0/Bldg                            1990                           300,000              MACRS                         160,000                        285,000

3. Machine 1                      2000                          10,000                  MACRS                          25,000                           80,000

4. Machine 2                    2001                           60,000                 MACRS                          55,000                           95,000

Personal Assets                                Acquisition Date                             Fair Market Value                            Original Cost

1. Sculpture                                            1991                                                  400,000                                         260,000

2. Painting                                              1998                                                   400,000                                          525,000

3. 100,000 Shares ACC                         2004                                                   800,000                                         1,050,000

4. 10,000 Shares BBL                          2006                                                   400,000                                            350,000  

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