Mr. Briggs purchased an apartment complex on January 10, 2013, for $2 million wi
ID: 2456377 • Letter: M
Question
Mr. Briggs purchased an apartment complex on
January 10, 2013, for $2 million with 10% of the price allocated to land. He sells the com-
plex on October 22, 2015, for $2.5 million. Assume that 10% of the $2.5 million selling
price is allocated to land and 90% is allocated to the building.
a. How much depreciation was allowed for 2013?
b. How much depreciation is allowed for 2015?
c. Will any of the gain be ordinary income?
d. What is the amount of gain and the character of the gain on the sale of the building?
e. What is the amount of gain and the character of the gain on the sale of the land?
f. Will any of the gain be taxed at 25%?
Explanation / Answer
Answer
a. How much depreciation was allowed for 2013?
No Information given about depreciation. So it will remain uncaptured
a. How much depreciation was allowed for 2015?
No Information given about depreciation. So it will remain uncaptured
c. Will any of the gain be ordinary income?
Yes Ordinary income
Net profit = $500,000
Building profit = $450,000
Land profit = $50,000
d. What is the amount of gain and the character fo thegain on the sale of the building?
It is Long term capital Gain
Building profit = $450,000
e. What is the amount of gain and the character of the gain on the sale of the land?
It is Long term capital Gain
Land profit = $50,000
f. Will any of the gain be taxed at 25%?
Yes both Building and Land will be taxed.
As capital gains from the disposition of depreciable real estate to the extent of any unrecaptured straight-line depreciation
2013 Total 2,000,000 Building 1,800,000 Land 20,000 2015 Total 2,500,000 Building 2.250,000 Land 250,000Related Questions
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