Tax Year - 2018 Robert acquired his rental property 10 years ago for $110,000 and sold...
Tax Year - 2018
Robert acquired his rental property 10 years ago for $110,000 and sold it in the current year for $230,000. The accumulated straight-line depreciation on the property at the time of the sale was $35,000. Robert is in the 32 percent tax bracket for ordinary income.
a. What is Robert’s gain on the sale of his rental property?
b. How is the gain taxed? (i.e., what tax bracket is the gain subject to)?
Homework Answers
Answer:
7a) Robert’s gain on sale of his rental property is Sales price –(Cost of the asset – Accumulated depreciation) = $230,000– ($110,000 - $35,000) = $230,000 - $75,000 = $155,000
b) Gain is subject to 20% bracket. By adding this gain to the income, the tax bracket will raise from 32% to 20%.
At 32%(ordinary income rate) on accumulated depreciation of $35,000
At 20%(capital gain tax) on capital gain of (230000-110000=)$120,000
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Tax Year - 2018
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