3) Peter, a single taxpayer, bought a house to use as a rental property on April

Question

3) Peter, a single taxpayer, bought a house to use as a rental property on April 1, 2007, for $300,000. He moved into the house on June 1, 2013, and used it as his personal residence until August 1, 2014, when he sold it for $500,000. Depreciation taken while the property was used as a rental property was $25,000. What was Peter’s a) realized gain on the sale of the property? b) recognized gain on the sale of the property? c) recognized gain on the sale of the property if it is not sold until August 1, 2015, for $500,000?

Explanation / Answer

Ans;

Purchase price of property = $300,000

Depreciation = $25,000

Net adjusted value of the property = $300,000- $25,000 = $275,000

Selling price of the property = $500,000

Therefore Realized gain = Selling price of the property - Net adjusted value of the property

= $500,000- $275,000 = $225,000.

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