On january 1 of year one ,owner purchased some commercial property at a cost of
ID: 2426206 • Letter: O
Question
On january 1 of year one ,owner purchased some commercial property at a cost of 880000 of which 780000 was properly allocable to the building and 100000 was allocable to the land .owner is a single taxpayer who has 100000 of ordinary taxable income from services in the year involed .owner recivies an offer to sell the property for 1 million, 890000 properly allocated to the building and 110000 properly allocated to land, disregard the mid month convention and assume,only for depreciation purpose, that the property was held for one full year and further assume that owner had no other session 1232 gains or losses for the year involved and no session 1231 losses in prior years. A , if the sale occurs on Dec 31 of year one, what is the amount ,character and rate of the tax on owners gain? B, what result to owner if he sells the property prior to 2011 on jan 2 of year two? C, in view of the results above , should session 1250 be repealed?
Explanation / Answer
a)owners gain= 1,000,000-880,000=$120,000
tax gain is based on his taxable income and it comes under 25% bracket.
total tax on income now= $21,071.25
tax on gains=.25*120,000=$30,000
total tax= $51,071.25
b)Long term capitla gain=15% and it comes as $18,000 and tax on income is $21,071.25
Total tax is $39,071.25
c)
Tax=$56206.25
b)on year it comes under long term capital gain it is 15%
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