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?

Question

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?

Quizplus · Accepted Answer

The Answer is A) $5,715; B) $129,285
Explanation: Refer to Appendix 20A.
a)

\begin{array}{lr} ext { Purchase price } & \$ 120,000 \7 ext { years of deprecation }(7 imes \$ 3,300) & \underline{23,100} \ ext { Book value } & \$ 96,900\\ ext { Net proceeds } & \$ 135,000 \ ext { Book value } & \underline{96,900} \ ext { Capital gain } & 38,100 \ ext { Capital gains tax rate } & 15 \% \ ext { Capital gains tax } & \$ 5,715\end{array}

b)

\begin{array}{lr} ext { Net proceeds } & \$ 135,000 \ ext {-Capital gains tax } & \frac{5,715}{\$ 129,285}\end{array}

A Duplex Was Purchased for $120,000, and Depreciation of $3,300