Mr. Briggs purchased an apartment complex on January 10, 2016 for $2 million with 10% of...

Mr. Briggs purchased an apartment complex on January 10, 2016 for $2 million with 10% of the price allocated to land. He sells the complex on October 22, 2018 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 2016?

b. How much depreciation is allowed for 2018?

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%?

Solutions

Expert Solution

ekkarill92 answered 2 months ago

Next > < Previous

Related Solutions

Carl purchased an apartment complex for $1,100,000 million on March 17 of year 1. $300,000 of...

Carl purchased an apartment complex for $1,100,000 million on March 17 of year 1. $300,000 of the purchase price was attributable to the land the complex sits on. He also installed new furniture into half of the units at a cost of $60,000. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) a. What is Carl's allowable depreciation expense for his real property for years 1 and 2? b. What is Carl's allowable depreciation expense for...

2. Plant, Property and Equipment On January 2, 2016, SaulGroup purchased equipment at a cost of...

2. Plant, Property and Equipment On January 2, 2016, SaulGroup purchased equipment at a cost of $5 million. The equipment has a five-year life, no residual value, and is depreciated on a straight- line basis. On January 2, 2018, the fair value of the equipment (net of any accumulated depreciation) is determined as $6 million. a. If the revaluation model is applied for measurement subsequent to initialrecognition under IFRS, what is the impact the equipment has on SaulGroup’s income in...

There is a 10 unit apartment complex in Bas Axe for sale. All have one BR,...

There is a 10 unit apartment complex in Bas Axe for sale. All have one BR, separate utilities, acreage to expand, monthly income is $3,900 and asking price is $175,000. Assume 10% vacancy, no capital reserve, and 40% fixed and variable expenses. What is capitalization rate? Why would this be attractive for investor?

On January 1, 2016, Gless Textiles issued $21 million of 10%, 10-year convertible bonds at 101....

On January 1, 2016, Gless Textiles issued $21 million of 10%, 10-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Gless’s no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is, 99% of face amount). Century Services purchased 15% of the issue as an investment. Required: 1. Prepare the journal entries for...

10)Gordon Company purchased an asset on January 1, 2016 for $25,000. At that time, Gordon Company...

10)Gordon Company purchased an asset on January 1, 2016 for $25,000. At that time, Gordon Company estimated the residual value would be $1,000 at the end of the asset's projected ten-year life. It is now January 1, 2020; Gordon Company now estimates the asset will have a residual value of $1,500, and has a remaining useful life of four years (will last until the end of 2023). Assuming Gordon Company uses the straight-line method, what will be the depreciation expense...

Mary purchased an apartment building on March 12, 2017, for a total of $3 million of...

Mary purchased an apartment building on March 12, 2017, for a total of $3 million of which $600,000 was the value of the land on which the apartment building was located. Also, Mary purchased 7-year class new business equipment for $45,000 on November 11, 2017. She elects not to immediately expense the equipment under §179 and elects not to take the additional first-year depreciation. Mary purchased no other business assets during 2017. Determine Mary’s depreciation on the apartment building for...

Depreciation and Rate of Return Burrell Company purchased a machine for $51,000 on January 2, 2016....

Depreciation and Rate of Return Burrell Company purchased a machine for $51,000 on January 2, 2016. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before depreciation and income taxes of $25,500 each year. The tax rate is 25%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods....

On the 2 January 2016, Nivea Ltd purchased, by exchanging $267,000 cash and a $160,000, 12%,...

On the 2 January 2016, Nivea Ltd purchased, by exchanging $267,000 cash and a $160,000, 12%, 18 month finance company loan, assets with the following independently determined appraised values: Appraised value Building $320,000 Land 80,000 Machinery and equipment 100,000 $500,000 The estimated useful life of the building is 30 years and its residual value is $18,000. The $100,000 machinery and equipment amount consists of three machines independently valued at $29,000 each and some office equipment valued at $13,000. The estimated...

Depreciation Methods Gruman Company purchased a machine for $198,000 on January 2, 2016. It made the...

Depreciation Methods Gruman Company purchased a machine for $198,000 on January 2, 2016. It made the following estimates: Service life 5 years or 10,000 hours Production 180,000 units Residual value $ 18,000 In 2016, Gruman uses the machine for 1,700 hours and produces 45,000 units. In 2017, Gruman uses the machine for 1,200 hours and produces 32,000 units. If required, round your final answers to the nearest dollar. If Gruman used a service life of 8 years or 15,000 hours...

Depreciation Methods Gruman Company purchased a machine for $198,000 on January 2, 2016. It made the...

Depreciation Methods Gruman Company purchased a machine for $198,000 on January 2, 2016. It made the following estimates: Service life 5 years or 10,000 hours Production 180,000 units Residual value $ 18,000 In 2016, Gruman uses the machine for 2,000 hours and produces 40,000 units. In 2017, Gruman uses the machine for 1,400 hours and produces 32,000 units. If required, round your final answers to the nearest dollar. Required: Compute the depreciation for 2016 and 2017 under each of the...

Subjects