What is the capital gain tax of a 6-year old commercial property, sold for $700,000, which...
What is the capital gain tax of a 6-year old commercial property, sold for $700,000, which was originally bought for $500,000, with 1/4 land/building allocation, that has a $100,000 capital expenditure to improve its roof and is depreciating at a rate of 3.636% per year based on MARCS? Given: Short-term capital gain tax is 28% and long-term 15%.
a. $28,089.60
b. $52,433.92
c. $43,089.60
d. $80,433.92
Homework Answers
| Selling price | 700,000 | |
| Purchase price | 500,000 | |
| Land/ Building | 1/4 | |
| Land purchase value | 100,000 | =20% of purchase price |
| Building purchase value | 400,000 | =80% of purchase price |
| Capex | 100,000 | |
| Revised building value | 500,000 | |
| ST CG tax | 28% | |
| LT CG tax | 15% | |
| Applicable tax rate | LT CG tax | |
| Depreciation rate | 3.636% | |
| Depreciation over 6 years | 87,264 | =depreciatio rate*no of years*building value |
| Revised building value | 412,736 | =Building value- depreciation |
| Revised land value | 100,000 | |
| Total value | 512,736 | =Land+ building |
| Selling price | 700,000 | |
| Accounting Profit | 187,264 | =selling price- value |
| Tax rate | 15% | |
| Tax liability | 28,090 | =tax rate% accounting profit |
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