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What is the gain on sale

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Question - Consider the following two scenarios. The taxpayer sells the property acquired in April 2019 for $800,000 (rental real estate, 27.5 year depreciation) on December 31, 2019 or December 31, 2020 for $1,000,000. Assume the taxpayer is in the 37 percent tax bracket.

Scenario 1. Sale on 12/31/19

Scenario 2. Sale on 12/31/20

1. What is the gain on sale? Show calculations.

2. What kind of gain is this? Ordinary, Capital, or Section 1231? Explain why.

3. Based on your answers above, calculate the tax owed on the gain.

Reference no: EM132427671

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