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

Accounting Jul 26, 2020

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?