Deck 21: a Comprehensive Analysis for Real Estate Investment Decisions

Question 1

An apartment complex has net operating income of $15,000,depreciation of $8,000,and interest expense of $13,000.The tax rate is 30%.
a)What is taxable income or loss?
b)What is the tax shield benefit or tax owed?

Answer 1

a)($6,000);b)$1,800

Question 2

A duplex was purchased for $120,000,and depreciation of $3,300 has been taken for the last seven years.The net proceeds from the sale of the property were $135,000.
a)Assuming the property qualifies for capital gains treatment at a 15% rate,what is the tax owed?
b)What are the net funds from the sale?

Answer 2

a)$5,715;b)$129,285