Question

An investor paid $43,000 for a lot and $520,000 to have a strip mall constructed on it. he has depreciated the property for the past 15 years on a 39-year straight-line schedule. if he sells the property this year and realizes $710,000 after closing expenses, what is his capital gain?

Answer 1

Based on the amount he bought the place for and the annual depreciation, the capital gain would be $363,538.

First find the depreciation on the property so far.

Depreciation after 15 years

= (Sum of lot and construction price) / 39 years x 15 years

= (43,000 + 520,000) / 39 x 15

= $216,538

Capital gain

= Selling price - (Property purchase and construction value - Depreciation)

= 710,000 - (43,000 + 520,000 - 216,538)

= $363,538

In conclusion, he made a capital gain of $363,538.

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