Question

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.

Answer 1

(d). 216,541

Step-by-step 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.