Question

What is the capital loss of Taxpayer who sells an apartment building for $100,000 that was purchased in 1993 for $200,000 and depreciated by $90,000?

A. $0
B. $10,000
C. $20,000
D. $30,000

Answer 1

The capital loss is calculated by subtracting the sale price from the adjusted basis, which is the original purchase price minus accumulated depreciation. The adjusted basis is $110,000 and sale price is $100,000, resulting in a capital loss of $10,000.

Step-by-step explanation:

To calculate the capital loss on the sale of the apartment building, we must first determine the adjusted basis of the property. This is done by subtracting the total amount of depreciation taken from the original cost of the property. In this case, the taxpayer purchased the building for $200,000 and depreciated it by $90,000 over time. Therefore, the adjusted basis is:

$200,000 (original purchase price) - $90,000 (accumulated depreciation) = $110,000 (adjusted basis).

The capital loss is then found by subtracting the sale price of the property from the adjusted basis:

$110,000 (adjusted basis) - $100,000 (sale price) = $10,000 (capital loss).

Thus, the answer is B. $10,000.