Question

Facts and information below are needed to resolve questions 1 through 3 Wlly Realty LLC, a partnerbip owned entirely by individuals, sells an apartment building for $16,500,000. The basis of the building immediately prior to the sale is as follows: Original Cost Unadjusted Tax Basis 3,000,000 Accumulated Depreciation Land (1.900,000) (65,000) 12,500,000 Building Furniture& Fistures 75,000 1Using the above information, determine the gain or lom on the ale of the apartment beilding to the Individual owners 2 Auming that the allocation of the selling price is $3,100,000 to land, $13,350,000 to bailding and $50,000 to furniture and fxtures, prepare n etimate of the total taxes for the owners on the ale 2. Ifposible, pick an alternative allocation of the sales price to assets such that there would be a reduction in the total taxes and. prepare an estimste of aes based on your asumpeions

Answer 1

1.	Gain/Loss on sale of Apartment building
	Sale value	1,65,00,000.00
	Less : Cost of Land	-30,00,000.00
	Less : Cost of Building	-1,06,00,000.00
	Less : Furnitures and Fixtures	-10,000.00
	Profit on Sale - Capital Gain	28,90,000.00
	Tax on Capital Gain u/s 112 to be paid
2.		Land	Building	Furniture and Fixtures
	Sale value	31,00,000.00	13,33,50,000.00	50,000.00
	Less : Cost	-30,00,000.00	-1,06,00,000.00	-10,000.00
	Profit on Sale	1,00,000.00	12,27,50,000.00	40,000.00
	Tax on Capital gain @ 10%	10,000.00	1,22,75,000.00	4,000.00
3.	An alternative allocation of Sales prices to the assets shall be to allocate more cost for Buildings and Furniture and Fixtures and less for Land.
	The reason being, all depreciable assets and Short term capital assets and profit on such assets results in payment of Short term capital gain tax which is higher than Long term capital gain tax