Sally acquired an apartment building 15 years ago for $150,000 and sold it for $410,000 in the current year. At the time of the sale, there is $65,000 of accumulated straight-line depreciation on the apartment building. Assuming Sally is in the 32 percent tax bracket for ordinary income, how much of her gain is taxed at 15 percent?

Question

Quizplus · Accepted Answer

The gain on the sale of the apartment building is $260,000 ($410,000 - $150,000). The accumulated depreciation of $65,000 is added back to the gain to arrive at the amount of gain that is subject to tax. The gain that is taxed at 15 percent is the amount of gain that is attributable to the depreciation that was taken on the apartment building. Therefore, the amount of gain that is taxed at 15 percent is $65,000.

Sally Acquired an Apartment Building 15 Years Ago for $150,000