Question

Sylvio purchased an apartment building as an investment in January 2008 for $383,500 and sold it for $475,000 in 2014. He reported $68,436 of allowed accumulated straight-line depreciation. If Sylvio is in the highest tax bracket for ordinary income, how much of his gain qualifies for preferential tax treatment? (Points : 1)

$0.

$68,436.

$91,500.

$159,936.

Answer 1

Answer:

Hi there!!

$159,936

Explanation:

Sales proceeds                                                $475,000

Less: book value

 Cost                                       $383,500

 Accumulated depreciation $(68,436)         $315,064  

Gain                                                                  $159,936      

Since Sylvio has maintained its investment for more than a year, the tax law allows reducing the tax on capital gain although the form of calculation of the profit is the same as for common cases.

In this case tax rate drops from 39.6% to 20%.