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1 May, 22:19

A small apartment building has a NOI of $40,000, interest expense of $14,000 and annual depreciation of $6,000. Assuming a 30% tax bracket, what is its income tax liability?

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  1. 1 May, 22:43
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    Income Tax Liability will be $ 6000.

    Explanation:

    Given data

    NOI = $ 40000

    Interest Expense = $ 14000

    Depreciation = $ 6000

    Income Tax rate = 30 %

    Income Tax Liability = ?

    To find income tax liability for the year, first we have to calculate annual taxable income.

    Taxable income = NOI - Interest expense - Depreciation

    Taxable Income = $40000 - $ 14000 - $ 6000

    Taxable income = $ 20000

    Income Tax liability = Annual Taxable Income x Income tax rate

    Income Tax liability = $ 20000 x 30 % = $ 6000.
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