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24 January, 01:43

An investor paid $43,000 for a lot and $520,000 to have a strip mall constructed on it. he has depreciated the property for the past 15 years on a 39-year straight-line schedule. if he sells the property this year and realizes $710,000 after closing expenses, what is his capital gain?

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  1. 24 January, 02:46
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    The depreciation of the property over 39 years in a straight-line manner will be 520/39 = 13.333 thousand per year. Since it has been 15 years, the total depreciation to date is 13.333*15 = $200,000. Thus the book value of the building at this time is $520,000 - $200,000 = $320,000 for the building. We add to that the $43,000 book value of the land to get a total value of 320+43 = $363,000. If the property sells for $710,000, then the capital gain is 710-363 = $347,000.
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