Shanstella bought a 4-unit apartment building in July 2007 for $360,000 and sold it for $480,000in 2016. There was $96,541 of accumulated straight-line depreciation on the apartment building. Assuming that Shanstella is in the 33% tax bracket, how much of her gain is taxed at 25%? a. $0. b. $96,541. c. $120,000. d. $216,541.

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Paige

1 October, 14:35

Shanstella bought a 4-unit apartment building in July 2007 for $360,000 and sold it for $480,000in 2016. There was $96,541 of accumulated straight-line depreciation on the apartment building. Assuming that Shanstella is in the 33% tax bracket, how much of her gain is taxed at 25%? a. $0. b. $96,541. c. $120,000. d. $216,541.

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Pasha · Answer 1

(d). 216,541

Explanation:

Sales Consideration = $480,000

Book Value as on date of sale = Cost - accumulated depreciation till date = $360,000 - $96,541

= $263,459

Long term capital gain (since asset held for use for more than an year) = Sales Consideration less Book value on date of sale = $480,000 - $263,459

= $216,541

Since building comes under the definition of a capital asset and since it has been held for use for more than an year, the gain arising out on it's sale would be regarded as long term capital gain.