Homework Answers
| The depreciation from | ||||||
| April 2019 to Dec 2019 is | ||||||
| 800000*2.576% | 20608 | |||||
| Book value on Dec 31 2019 800000-20608 | 779392 | |||||
| Book value on Dec 31 2020 800000-20608-(800000*3.636%) | 750304 | |||||
| ans 1 | in $ | |||||
| Scenario 1 | ||||||
| Gain 1000000-779392 | 220608 | |||||
| Scenario 2 1000000-750304 | 249696 | |||||
| ans 2 | ||||||
| Scenario1 It is short term capital gain as sold in less than one year | ||||||
| Secnerio 2 is Long term capital gain section 1231 gain as sold more than one year | ||||||
| ans 3 | ||||||
| Tax owed | if rounded off | |||||
| Secnerio 1 at ordinary rate 220608*37% | 81624.96 | 81625 | ||||
| Senerio 2 | ||||||
| Capital gain rate of 20% as ordinary tax rate is 37% (1000000-800000)*20% | 40000 | |||||
| (249696-200000)*37% depreciation recapture is taxed at ordinary rate | 18388 | 58388 | ||||
| ans 4 | ||||||
| We learned that the property sold within one year is treated as short term and the capital gain is taxed at ordinary rate | ||||||
| When property is sold after using for more than a year than the part of gain is treated as depreciation recapture and taxed at ordinary rate | ||||||
| and the remaining gain is taxed at capital gain rate | ||||||
| If any doubt please comment | ||||||
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