O&V sold an asset with a $78,300 adjusted tax basis for $100,000.The purchaser paid $30,000 in cash and assumed O&V's $70,000 mortgage on the asset.Compute O&V's net cash flow from the sale assuming a 35% tax rate.

Question

Quizplus · Accepted Answer

O&V's gain from the sale is $21,700 ($100,000 - $78,300). The tax on the gain is $7,595 ($21,700 * 35%). The net cash flow is the cash received minus the tax: $30,000 - $7,595 = $22,405.

O&V Sold an Asset with a $78,300 Adjusted Tax Basis