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 35 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 is $410,000 - ($150,000 - $65,000) = $325,000. The $65,000 of accumulated depreciation is taxed at a maximum rate of 25% (unrecaptured Section 1250 gain). The remaining gain of $260,000 is taxed at the long-term capital gains rate of 15%.

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