Ken sold a rental property for $606,000. He received $142,000 in the current yea

Question

Ken sold a rental property for $606,000. He received $142,000 in the current year and $116,000 each year for the next four years. $470,000 of the sales price was allocated to the building and the remaining $136,000 was allocated to the land. Ken purchased the property several years ago for $427,500. When he initially purchased the property, he allocated $342,500 of the purchase price to the building and $85,000 to the land. Ken has claimed $33,600 of depreciation deductions over the years against the building. (Round your final answers to the nearest whole dollar amount. Input all the values as positive numbers.) Ken had no other sales of $1231 or capital assets in the current year. a. For the current year, determine the amount of Ken's total recognized gain or loss. (Hint: See the examples in Reg. $1.453-12.) b. For the current year, determine the character of the gain or loss and calculate Ken's total tax due because of the sale (assuming his marginal ordinary tax rate is 35 percent). Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req A Req B For the current year, determine the amount of Ken's total recognized gain or loss. (Hint: See the examples in Reg. 51.453 12.) Description 606,000 $ 393,900 (1) Amount Realized (2) Adjusted Basis (3) Gain realized (4) Gross Profit Percentage (5) Payment received in year 0 212,100 35 % 42,000 Gain recognized in year 0 49,700 leg A

Explanation / Answer

Solution is as follows:

Character Amount Tax Rate Tax Amount Other 1231 gain $16,100 15% $2,415 Unrecaptured 1250 (1231 gain) $33,600 25% $8,400 Tax $10,815

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