Anton purchases a building on May 4, 1998, at a cost of $380,000. The land is pr
ID: 2479946 • Letter: A
Question
Anton purchases a building on May 4, 1998, at a cost of $380,000. The land is properly allocated $20,000 of the cost. Anton sells the building on October 18, 2015, for $380,000.
a. What is the character of Anton's gain or loss on the sale if he uses the regular MACRS system and the building is an apartment building? Assume the accumulated depreciation at the time of the sale is $227,990. The total would be $........... , of which $ 0 is Section 1250 recapture and $................. is unrecaptured Section 1250. Any balance is considered .
b. What is the character of Anton's gain or loss on the sale if he uses the regular MACRS system and the building is an office building? Assume the accumulated depreciation at the time of the sale is $160,782. The total would be $ .................., of which $ 0 is Section 1250 recapture and $ is unrecaptured Section 1250. Any balance is considered .
Explanation / Answer
a. Apartment building
The depreciation on apartment building is $227,990 resulted in an adjusted basis of $152,010 ($380,000- $227,990). MACRS uses straight line method of depreciation on real property and there is no section1250 recapture. However the depreciation of $227,990 is unrecaptured section 1250 gain, which is taxed at maximum rate of 25%.The $227,990 gain on the sale of building is all unrecaptured section 1250 gain,
b.Office building
The depreciation on apartment building is $160,782 resulted in an adjusted basis of $219,218 ($380,000- $160,782). There is no section1250 recapture on real property purchase dafter 1986. However the depreciation of $160,782 is unrecaptured section 1250 gain, which is taxed at maximum rate of 25%.The $160,782 gain on the sale of building is all unrecaptured section 1250 gain,
Amount realised $380,000 Adjusted basis $152,010 Gain on Sale $227,990 Section 1250 recapture - no excess depreciation 0 Uncaptured section 1250 gain ($227,990) Long Term capital gain 0Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.