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WAR (We Are Rich) has been in business since 1989. WAR is an accrual-method sole proprietorship that deals in the manufacturing and wholesaling of various types of golf equipment. Hack & Hack CPAs has filed accurate tax returns for WAR's owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with the owner of WARMr. Someday Woods (single). However, in early 2022, Jack Hack and Someday Woods played a round of golf, and Jack, for the first time ever, beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired you to compute his 2022 taxable income. Mr. Woods was able to provide you with the following information from prior tax returns. The taxable income numbers reflect the results from all of Mr. Woods's activities except for the items separately stated. You will need to consider how to handle the separately stated items for tax purposes. Also, note that the 20172021 numbers do not reflect capital loss carryovers.

	2017	2018	2019	2020	2021
Ordinary taxable income	$ 4,160	$ 2,080	$ 95,880	$ 173,400	$ 255,000
Other items not included in ordinary taxable income:
Net gain (loss) on disposition of 1231 assets	$ 3,240	10,400		$ (6,480)
Net long-term capital gain (loss) on disposition of capital assets	$ (15,600)	$ 1,080	$ (12,100)		$ (7,800)

In 2022, Mr. Woods had taxable income in the amount of $496,000 before considering the following events and transactions that transpired in 2022:

On January 1, 2022, WAR purchased a plot of land for $104,000 with the intention of creating a driving range where patrons could test their new golf equipment. WAR never got around to building the driving range; instead, WAR sold the land on October 1, 2022, for $41,600.

On August 17, 2022, WAR sold its golf testing machine, "Iron Byron," and replaced it with a new machine, "Iron Tiger." "Iron Byron" was purchased and installed for a total cost of $23,600 on February 5, 2018. At the time of sale, "Iron Byron" had an adjusted tax basis of $5,600. WAR sold "Iron Byron" for $29,000.

In the months October through December 2022, WAR sold various assets to come up with the funds necessary to invest in WAR's latest and greatest inventionthe three-dimple golf ball. Data on these assets are provided below:

Asset	Placed in Service (or purchased)	Sold	Initial Basis	Accumulated Depreciation	Selling Price
Someday's black sofa (used in office)	4/4/21	10/16/22	$ 3,320	$ 620	$ 3,140
Someday's office chair	3/1/20	11/8/22	8,640	3,160	4,400
Marketable securities	2/1/19	12/1/22	12,960	0	20,800
Land held for investment	7/1/21	11/29/22	49,000	0	51,600
Other investment property	11/30/20	10/15/22	14,000	0	11,200

Finally, on May 7, 2022, WAR decided to sell the building where it tested its plutonium shaft, lignite head drivers. WAR purchased the building on January 5, 2010, for $210,000 ($186,000 for the building, $24,000 for the land). At the time of the sale, the accumulated depreciation on the building was $54,000. WAR sold the building (with the land) for $324,000. The fair market value of the land at the time of sale was $49,000.

Description Gain or (Loss) Depreciation Recapture 1231 Ordinary income or (Loss) Short Term Long Term Total Long term 28% Long term 25% Long term 0/15/20% a. Land b. Iron Byron c1. Sofa c2. Chair c3. Marketable securities c4. Land - for investment c5. Investment property d1. Building d2. Land 0 0 0 0 0 0 0 0 0 - ordinary income - gains or losses exclusive of 1250 - Unrecapture 1250 Ordinary income Remaining unrecapture 1250 Remaining gain - 0/15/20 0 0 0 0 0 0 0 0 Long term capital loss carryover Reclassified

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