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Monique is planning to increase the size of the manufacturing business that she operates as a sole proprietorship

Accounting

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 plans to replace as part of the expansion. 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’s ordinary income of $600,000 currently places her in the 37 percent marginal 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 date Fair market value Depreciation method Adjusted basis Original cost
Truck 2001 $3,000 MACRS $0 $20,000
Office building 1996 300,000 MACRS 160,000 285,000
Machine 1 2010 10,000 MACRS 25,000 80,000
Machine 2 2011 60,000 MACRS 55,000 95,000
Personal assets Acquisition date Fair market value Original cost
Sculpture 1998 $400,000 $260,000
Painting 2005 400,000 525,000
100,000 shares ACC 2012 800,000 1,050,000
10,000 shares of BBL 2016 400,000 350,000

In addition to the proceeds from the sales of the business assets, Monique needs a minimum of an additional $800,000 for her planned expansion. Which assets should Monique sell to minimize her tax liability on the sales of the business and personal assets?

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