Otis bought a 2-unit apartment building in July 2008 for $330,000 and sold it for $400,000 on December 20, 2015. At the time of sale there was $83,493 of accumulated straight-line depreciation on the apartment building. Assuming Otis is in the 33% tax bracket, how much of the gain will be taxed at 25%?

Question

Quizplus · Accepted Answer

The adjusted basis of the apartment building is $330,000 - $83,493 = $246,507. The total gain on the sale is $400,000 - $246,507 = $153,493. Otis must pay a 25% tax on the amount of gain that is attributable to the accumulated depreciation, which is $83,493. Therefore, the answer is (C) $83,493.

Otis Bought a 2-Unit Apartment Building in July 2008 for $330,000