Sylvio purchased an apartment building as an investment in January 2010 for $383,500 and sold it for $475,000 in 2016.He reported $68,436 of allowed accumulated straight-line depreciation.If Sylvio is in the highest tax bracket for ordinary income,how much of his gain qualifies for preferential tax treatment?
A)$68,436.
B)$91,500.
C)$159,936.
D)$0.

Question

Quizplus · Accepted Answer

To calculate the gain on the sale of the property, we need to subtract the adjusted basis from the sale price. 
Adjusted basis = purchase price - accumulated depreciation 
Adjusted basis = $383,500 - $68,436 = $315,064 
Gain = sale price - adjusted basis 
Gain = $475,000 - $315,064 = $159,936 
Since Sylvio is in the highest tax bracket for ordinary income, he qualifies for a preferential tax treatment of 20% on the gain, which amounts to $91,500 (20% of the gain of $159,936). Therefore, the correct answer is B.

Sylvio Purchased an Apartment Building as an Investment in January