Solution-Balance of the capital gain

Balance of the capital gain

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Reference no: EM133266615

Wissahickon Apartments was purchased by Ms. Eliot for a Total Asset Cost (TAC) of $9,500,000 (including $1,000,000 for land). In addition to the initial TAC, Ms. Eliot also had to spend $500,000 in her second year of ownership to replace the roof. Although she would have preferred to "expense" the roof replacement, her accountant required her to treat this cost as a capital improvement that would need to be depreciated.

Ms. Eliot plans to sell the apartments for $14,000,000. She estimates that the brokerage fee and other costs of sale will be $400,000. If the total accumulated depreciation at the end of her holding period will be $2,000,000 and the outstanding mortgage balance will be $7,000,000, what will her Net Cash from Sale be assuming that her capital gains tax rate will be 25% on that portion of capital gain attributable to accumulated depreciation and 15% on the balance of the capital gain?

Reference no: EM133266615

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Balance of the capital gain

Reference no: EM133266615

Reference no: EM133266615

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