Hi,

I was wondering if someone could help me with the tax memo for my current assignment. Please, let me know if you are able to help me out with this. Much appreciated.

Thanks

Background

Patrick, a long-time client of yours, recently sold a few assets from his business. He brings the following information to you hoping you can help him make heads or tails of it:

• He sold an old pickup truck for $9,888 cash.
• He originally purchased the truck 10 years ago for $30,900. Since then, he has performed normal maintenance on it.
• At one point, he had to replace the truck’s transmission for an additional $3,589. (Because you knew about this, you have properly recorded depreciation on the truck for a total of $32,000 before the sale.)
• He sold an office building that he owned and used in his business. He purchased it 15 years ago for $800,000. Since then, he has added major improvements to the building, totaling $15,789.
• The depreciation taken on the building and the improvements through the date of the sale is $400,000.
• He sold the building for $978,000.

Task

Citing applicable tax law and regulations, help with a tax memo explaining how to determine gain or loss on the two sales and how it will be taxed or deducted.